Are we heading for a second global financial crisis?

An interesting article was published in Guardian, Wednesday 3 August 2011 that shows the mainstream coming around to the idea that an out of control financial sector might not be such a great idea after all.

…there is a two-part economy in this world. There’s the real one – the one where you and I live and meet our needs, make and sell things (if only words on screens) and which is the measure of real well-being.

Then there’s the other one – the feral one, if you like (feral as in wild and out of control) – existing way beyond the limits of the real economy and only loosely related to it, made up of the enormous financial balances denominated in cash of various sorts, existing only as entries in computer ledgers. Some of these cash balances are backed up by supposed assets, which are at best legal claims on property which may or may not realise real worth, such as shares (whose value usually have almost no direct bearing to the companies that lend them their names), property (which has been priced as a consequence beyond the reach of the real economy) and more obscure derivative products, which few understand and which even fewer trade in ever larger amounts. This feral economy represents the wealth quite deliberately extracted from the real economy by those who have exploited it over the last thirty years…

But the relationship of the feral economy with the real economy is again wholly destructive: those feral deals – done beyond regulation, assisted by the world of secrecy that tax havens provide, are bringing destitution, unemployment, real failure and fear to real lives.

There is only one way out of this – and that is to bring feral finance back under control. Of course, that economy will fight back – Bob Diamond already is as he’s admitted that 90% of Barclays’ profits come from feral activity – but that’s a challenge courageous states have to face. And doing so is possible; the techniques are available. New, green quantitative easing, spent into the economy and not just given to banks, can reclaim this feral world and it’s resources for the real economy.

You can read the whole article here.