A Swan Song for Modern Finance?

What a perfect first year anniversary gift to the credit crunch, the collapse of one of the oldest and largest investment banks in the US.

Originally ‘nationalising’ Freddie Mac & Fannie May to protect US home owners from further battering, the US government’s decision to let go of Lehman’s has resulted in a media blizzard of metaphors from ‘toxic debt’, ‘black holes in accounts’, ‘earthquakes in the market’s, and the ‘tectonic plates of finance shifting’ heralding a new era of depression.

In the belief that the markets were ready to deal with the consequences of their actions, the US government refused to sweeten a deal for a Lehman’s buyout. With the financial markets so out of control many are wondering what exactly can our leaders do regain control of the economy?

Maybe the first steps would be to ask themselves some questions and I’ve suggested a few to get them started: Why are banks able to create money out of thin air in the form of debt, earn huge profits from this in the form of interest and trade it globally as ‘collateral’? How has our economy arrived at a point when only 3% of money is in the form of notes and coins?

The Monopoly game that high street banks are playing was fine as long as it wasn’t negatively impacting the ‘real’ economy: but with rising inflation, house price crashes a possible 2 million unemployed and an economy nearing in recession is it time for monetary reform?