Every now and then a financial journalist hits the nail on the head in the issue of the debt crisis.
An article entitled “West’s debt explosion is real story behind Fed QE dance” by Gillian Tett in the Financial Times on 19th September exposes the core of the debt crisis problem, and explains why it is a mere illusion to think that the finance was fixed and the economy recovered:
Quoting Lord Adair Turner, former UK regulator, it reads:
“…the real story behind the recent dramatic financial sagas – be that the market dance around QE or the crisis at Lehman Brothers five years ago – is that western economies have become hooked on ever-expanding levels of debt.
Until this situation changes it is delusional to think that anyone has really “fixed” western finance with post-Lehman reforms, or created truly healthy growth…”
We explain in our Banking 101 video course (and pretty much everywhere on our website) the fictions about banking in the standard economics text books. The Financial Times exposes this as well, highlighting that textbooks claim that banks exist to “raise deposits from savers and then make loans to borrowers” … and “primarily lend to firms/entrepreneurs to fund investment projects”. Gillian writes:
“This makes a mockery of existing textbooks and official policy assumptions.”
There have already been a few articles in the Financial Times talking genuinely about the real way of how banks work, e.g. Pre-school lessons for the bankers and others – this can make us hopeful to see more of it in the future!