by Ulf Nilson
Nordstjernan columnist, October, 2008

No, it is not going to be as bad as in the 1930's, when 25 percent of the US labor force was out of work and the situation was equally bleak in many European countries (not to mention Asia and Africa, where nobody bothered to count in those days…).
And no, again: most people are not, repeat not going to lose their life savings. In fact life will become harder for many – sick, unemployed, elderly and others – but most will cope, and in time things will straighten out….
This is not to say that the crisis is not serious. It most certainly is. To mention but one probable, if not inevitable consequence, it is likely that the week beginning Monday, Sept. 15, decided the presidential election. When the stock market takes the worst dive within living memory; when tens of thousands of people are forced to leave their homes; when unemployment rises as dramatically as the banks are falling; when everybody thinks there is worse to come; well, then you are not going to vote for any representative of the party in power. So, in my opinion, the race for the White House is over. McCain can just as soon pack up. It’s true that he is a maverick (as well as a hero and a very likeable guy), but barring a miracle it’s all over and Sarah Palin can concentrate on moose hunting for at least 4 years to come. For Barack Obama, Fannie May, Freddie Mac, Lehman Bros, Merrill Lynch and – not the least – AIG, was a windfall.
Right off I can count on only one event that would (perhaps) change the scenario and that’s war with Iran. I confess that the thought scares me very much, not the least as quite a few experts have voiced concern that the “best” time for Israel/US to strike is the window between Nov. 4 and Jan. 20, when the sitting president has nothing to lose and the incoming one does not have to accept responsibility.
But this was an aside. What happened? The truth is that nobody – and certainly not I – knows all, or even a tenth of the facts. But put in simple and perhaps simplified terms, greed got the better of the finance industry. Loans were given to people who were not credit worthy who recycled time and time again in “instruments” and “derivatives” that were soon enough worth nothing. This exercise is of course dangerous but as long as everybody trusts that the show will go on, nothing happens. It’s when people and institutions start paying their debts with borrowed money and – after a while – stop paying both short and long term loans that the whole skyscraper house of cards comes crashing down. When too much debt is covered with securities and sometimes insurances (see AIG) worth nothing, the meltdown is inevitable. And, in today’s global world, unlike in the 1930's, everybody will suffer.
It is very painful to have to write that exceedingly many bankers, brokers, financial advisers and the like knew very well what would happen. But increased turnovers (even if what turned over was thin air) begat larger bonuses in – very important – absolutely real money.
I think a video from Wall Street that I saw here in the South of France captured the situation very, very well. A young Master of the Universe broker from Lehman Bros carried his personal belongings along the street in a couple of cartoons. When he came to the parking lot, he dumped the cartoons in the trunk…
…of his brand new Rolls Royce….