During my usually intensive weekend reading spree, I came across some information that could prove to be a “crystal ball” of the economy. According to a Nobel Prize winning economist, Joseph Stiglitz, the US banking system is worse off today than it had been prior to the collapse of Lehman Brothers exactly one year ago today. This took me by surprise considering that I have been criticizing the bailout and frivolous spending policies that were enacted to shore up the banking sector after Lehman fell.
The fall of Lehman Brothers marked the beginning of the crisis we see ourselves in, and I am not one of those that believe if the US took the time and means to save Lehman, this would have been prevented. On the contrary, I am and always have attested to the fact that I am a capitalist. Part of my core beliefs is that you need failure in order to breed success, and that if a company, no matter how big, finds itself struggling due to mistakes, there should not be a knight in shining armor coming in on a white horse to protect it. It is the nature of society that bases itself on Adam Smith’s ideas to take advantage of the weak and build something stronger out of its ashes.
A great example of this philosophy is the old Manufacturers Hanover Bank (Manny-Hanny for short) which was one of the largest banks in the US for over 179 years folded in 1991 due to bad investments and decisions. The company was taken over ultimately by another, lesser known corporation called Chemical Banking Corp. which was also a throwback to the 1800’s but never achieved the size of Manny-Hanny. The takeover started a chain reaction that led to what is now called JP Morgan Chase Bank, the second largest and arguably one of the best in the banking business today.
I also believe that if Lehman were saved, another bigger and more damaging bank would have collapsed causing an even larger problem. The issue was not Lehman, as Lehman was small time compared to Merrill Lynch, AIG and Goldman Sachs, which all had big issues but were saved by the US after Lehman fell. Anyway, the government made claims that the money the US taxpayers spent to bailout the banks will secure the financial industry on “main street and Wall Street.” But Trillions later it seems as if we are in the same boat and the hole in the bottom is bigger now.
Forex trading is easy and simple when you have accurate information. As a rule I never listen to politicians and seek my information from “neutral” sources that have nothing to gain or lose by giving their opinions. When the US Treasurer tells us all that the economy is back on track and that the banks are safe, how can we be sure he is not saying that to help boost poll numbers? So when a chap like Nobel Laureate like Stiglitz comes out and stakes his reputation on the fact that the US banking system is poised to fall once more – how can I not listen to him?
I write this Forex online blog not to give advice on what to buy or sell – but to provide information and opinions meant to help everyone make smarter trading decisions. It is times like this that I really take enjoyment in what I do.
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