Warning Signs ; what sort of a ditch do the banks call this to make a stand in?

This blog can seem very gloomy at times. Actually, I applaud attempts to change the inevitable, not that it matters too much in the scheme of things, and I'm really quite a cheery man I think. Despair is a sin. However, tonight's news that five central banks are attempting to inject, through cash auctions, over fifty billions of pounds into Western markets at cheap rates must rank as the greatest rumble of oncoming thunder yet.

It's easy to use all sorts of over weighty macho language to dress up what is at the space where its heart ought to be a very straightforward sector. They lend us money when we do not need it and then they ask for it back when we do. They also make some attempt to regulate the very clever but often unwise wolves they tend to employ.

But fifty billions? Is that really going to matter to markets worth trillions? And even if there is a temporary rally, how is what is going on anything other than a test run for a firewall that does not need to be erected? This is a 1905 solution for a 1928 kind of a world.

What does need to be done is that debt, both personal and that of governments, should be paid down before the shift in global power and influence switches to a new and altogether more dangerous phase.

Sometime early next year the Balkans and the Middle East are destined for the sort of trouble that can only serve to encourage the oncoming fall in aggregate demand and to reinforce a loss of investment confidence. If it is bad enough, it will displace them altogether. Late next year, after the Olympics, China will begin to deploy its sovereign fund.

The combination of those two economic pincers with incipient inflation and the concerted pressure Al-Qaeda and their allies are now putting on North Africa--and therefore European energy supplies and migration routes--could potentially lead to a big global downturn.

So pro-active activity is a good thing. But I wonder still what the banks think they are doing. Is this just a signal? Does the Northern Rock injection of cash add to it? Or is it that our leaders just have no clue what they are doing beyond some scheme they dreamt up to give the appearance of coordinating without bringing their politicians and peoples along?


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