For a gentle introduction to the financial crisis, see Ann Pettifor‘s The Week that changed Everything and Why the Bail-Out would not Work.
For longer-term reasons for the crisis see Spengler‘s US Shrinking wealth
Why didn’t these overseas investors buy mortgages in their own countries, instead of scraping the bottom of the credit barrel in the United States? It is because there aren’t enough Germans, or Italians, or Frenchmen or Japanese starting families and buying homes. The aging pensioners of Europe and Asia must find young people to pay interest into their pensions, and they do not have enough young people at home.
There is nothing complicated about finance. It is based on old people lending to young people. Young people invest in homes and businesses; aging people save to acquire assets on which to retire. The new generation supports the old one, and retirement systems simply apportion rights to income between the generations. Never before in human history, though, has a new generation simply failed to appear.
The monster is not the financial system, crooked and stupid as it may have been. The monster is the burgeoning horde of pensioners in Germany and other industrial countries. It is easy to change the financial system. The central banks can assemble on any Tuesday morning and announce tougher lending standards. But it is impossible to fix the financial problems that arise from Europe’s senescence.
For more views, here are Becker & Posner, and here are the FT economists’ blogs. On the earth’s impending Sabbath see Andrew Simms Final Countdown – One Hundred Months to a climate change tipping-point and there’s more on the link between other people’s poverty and our carbon expenditure at the New Economics Foundation.
It looks as though our bishop has got some more fasting to do. In fact it looks as though we may all be about to join him. Come, friendly Poverty.