The news today is dominated by stories that ignore the great elephant in every room in the world – the global economy.
In recent hours the Federal Reserve has announced measures to massage interest rates and lending in the US in order to stave off a critical debt situation, the Bank of England is preparing to print more virtual money for the same reason while the IMF’s predictions for world growth are politely but realistically pessimistic. Meanwhile world leaders, in Europe and the USA in particular, are divided and helpless about what to do to correct a situation of universal debt which they and their predecessors have created, relying on bureaucrats to find some way out of the crisis – and the officials are not happy about it.
It is ironic that the desperate measures that are being used to shore up the creaking financial systems are intended to promote spending by governments and consumers, so potentially increasing debt levels which already are in many cases unmanageable. It is ironic too that the decision-makers are not recognising that most people do not wish to, or cannot, spend money they have not got as the realisation of a world-wide recession hits home. Why encourage more debt?
Most countries in the world these days are running on debt, and all debts, one day, have to be repaid or written off, one way or another. For small businesses and consumers, bankruptcy is an increasingly necessary solution, but bankruptcy implies that the monies owed to creditors will be a debt to be absorbed by those creditors. If the world went bankrupt, who would be the ultimate creditor? That is the elephant in the room today.