Fiscal Manifestations

As I sit in Starbucks reading back issues of The Economist (from November 29th to December 5th 2008) I am surprised. As I read about the financial catastrophy from my seat, 9 months into the future, I am very surprised. In September of last year I traveled to Iceland on a whim, to soak in the soothing, ethereal waters of the Blue Lagoon and watch geysers explode. We did not know the Icelandic Krona was only weeks, even days away from complete collapse. In June, my sister planned a trip to London from the U.S. and I thought about moving back to the U.S. at the end of the year. In the passage of my daily life, there were hints that the world economy was unwell. The collapse of Northern Rock in the summer, the drop in retails sales...But I did not think this would have led to the catastrophic headlines of hundreds and hundreds of bankers losing their jobs, of New Labour slashing interest rates by 1.5%, of the bankruptcy of Iceland.

Apparently, other people did.

When Northern Rock was having so much trouble at the beginning of 2008, the British government subsidized them so they wouldn't go under, dragging other banks with them. I didn't understand this back when it happened. So one bank mismanaged their money - what does that have to do with other banks? Now I see. It was about confidence. People see a bank going under and they think their money is unsafe. But why didn't anyone take that as a red flag? Why didn't all these stimulus plans begin around that time, before the worth of the inflated pound plummeted and chaos descended on the world? It doesn't make sense that all this drama was foreshadowed so early last year, and no one did anything and I didn't see it.

If I would have waited a month, even a few weeks to go to Iceland I would have saved tons. If I had moved from the UK to the US 3 months earlier, my savings would be worth hundreds more. I did not have the insight to see the handwriting on the wall. Did anyone else?

If articles about the economic stimulus plans of the US, the UK, the EU, France and Germany are in The Economist as early as November, then someone must have had a heads-up before September. While it is my ego-centric nature to ask why no one warned me against my ill-fated decisions, a more important question I feel I need to ask is why didn't anyone do anything?? Northern Rock was taken over by the state in February of 2008, the economic collapse happened in September and it was SCARY. The headlines, for days, were like being hit in the stomach with a bag of bricks - bankers killing themselves, thousands losing their jobs, companies tanking. Was there enough advanced notice from the U.S. sub-prime mortgages to have saved the public from all the ulcers and headaches?

This brings up even more questions about big business execs and the government role in protecting them. The fiscal year ends in July, right? Is that when they hand themselves bonuses? A healthy three months later, they are all bankrupt. Am I missing something?