When the credit crunch kicked off it was a market problem. A lot of firepower was trained on the problem of global contagion but there was no fixing the underlying problem. There was just too much debt around and not enough cash. As the money guys, particularly the ones who enterprises were tilted in the ditch by the credit freeze, would put it, there was too much leverage and not enough liquidity.
This quickly became an economic issue and the focus was shifted from fixing the markets to bailing the economies of the world from Washington to Beijing, from Brussels to Paris.
This didn’t work either because it turned out that banks and business were not the only ones leveraged up to their eyebrows. Governments had also jumped into the champagne hot tub of spend-spend-spend-anomics are were as broke as an unemployed crack addict only with better credit.
Now the crisis had hit the political level, it wasn’t just the markets or the economy that was holed below the water but the social systems of the countries themselves that relied on unsustainable funding.
The crisis had hit the top.
So for a couple of years now the whole sorry mess sparked off in 2007-2008 has been with the politicians to sort out, folk famously bad at money.
Is it therefore any wonder that we appear stuck in a quagmire of recession?
Of course the left wing of thought on the crisis thinks that government in its wisdom is the answer to our problems and that the private sector, read “me and you,” are the cause for all this mess.
Now at last there is a little experiment underway to test this assumption.
Europe’s government, its bureaucrats and politicians has been on and remains on holiday. Unlike Christine Legarde who has been constantly tanned under the sever pressure of heading up the IMF, most politicians have been keen to get some time in the sun. So keen in fact they have been prepared to shut up shop and leave the euro crisis to run rampage unattended while they take their hard earned holidays. Soon all the Euro politicians will waft back from their beaches with their tans
What happened, when they dropped the euro crisis ball?
Things got better.
Spain and Italy has come back from the brink with not so much as a printing press whirring. The markets of Europe hav rallied without so much as a sun-lotion basted finger raised by Fraulein Merkel.
This could of course be because European Union is so well coordinated, so dynamic and so together that this was planned to be.
More likely it could be that politicians have been making things worse and their absence has had a calming effect.
The test will be September.
If the market goes into seizure again in September, it will be safe to say it is the politician who are pouring gasoline on the fire that is the euro crisis.
It will be proof that the people in charge of the European economic asylum really are the inmates.