A Series of Unfortunate Events.

This one's going to be a long post. And its going to comment on the one issue that’s got everyone around the world jumping off buildings and bridges. Yes, the economic meltdown faced by a certain King of the Hill western nation. A lot of experts have commented on it. A lot of experts have theorized on why it happened, how it happened and what to do. It’s amusing that all of these so called 'experts' suddenly seem to know so much about it, and yet they couldn't predict it for nuts. Keeping this in mind I realized that anyone with a little economic sense can trace the roots of the crisis backwards to a certain point. And here I am trying to do the same and get to the bottom of this downfall. If you don't want to know what it is that has the world in a tizzy. Then turn back now.

P.S.> This theory (if I may) is based on my views and mine alone. It has been influenced by a number of observations and as such is not a concrete law. I'm just a layman who saw a certain sequence in the time line which I felt the need to point out.



[1991-1995]

The roots trace back to the first Gulf War, back in 1991 before a certain trade body became existent which brought about free trade throughout the world. The war which began in 1990 started draining the resources of USA as soon as it got involved. Up till 1995 there was a constant strain on the monetary and military resources of the country. With a grand total cost of $61.1 billion it would be remembered only as moderately expensive compared to the current war. But what is important to note is that at this time, all the world economies were not as deeply linked as today. Since the concept of free trade was still to be fully realized, so the costs were covered and no other factors were compounding. However this war funds deficit would need to be covered by the tax payers and finally influenced the actual setting of world free trade in 1995.


[1995-2001]

Now lets shift to 1995, when GATT was disregarded and the WTO came into existence. This was right around the time when the first Gulf War had officially ended and a lot of people were mighty pissed about the money spent on a pointless conflict, but still a lot of people supported the war and all was well that ended well. When the WTO came into existence, the world suddenly became a flat economy, slowly getting flattened as world markets started accepting WTO and their own markets started opening.

Now suddenly the rich-and-influential-of-the-western-nations realized that there were a number of markets around the world in which they could put in their money and watch it grow. It was common sense to put your money in a growing economy so as that, as the economy grows so would your fortune. So these rich-and-influential-of-the-western-nations did exactly that and started pulling out their investments in war mongering and started pooling them into the apparent noble cause of helping fledgling countries flourish, while at the same time laughing their way to the banks.

All was well again. The rich were getting richer, the comparatively poor were getting comparatively better-off, and Al-Qaeda was getting angry.

When the first Gulf War ended, it left a lot of people dead and a lot of people angry. Since most of the dead were from the Muslim community, most of the angry belonged to that community as well. But the fault here was not on the community, it was on the war that was brought down on the community by other capitalist bastards to make their own profits. Under these situations, certain socio-political outfits decided to capitalize on the overall feeling of hatred and started planting seeds of uprisal. One Osama Bin Laden was getting ready to react, and one Saddam Hussein was getting cocky.

A few years after the WTO came out everyone around the world was busy in making money and a number of advances were taking place in the lifestyles and living standards around the world. One of the most notable ones which has a huge part to play in this is the Credit system. The system of plastic money and the creation of instant loans by banks in the USA and ultimately around the world. People around the world (and more specifically America) started living beyond their means. Essentially the credit card became a means of spending money we didn't have, and creating virtual wealth. This slowly began adding up, and I will move towards this later on. But keep in mind that the credit debt is slowly increasing as the time line goes on and other events take place. Right now there is a more pressing event in the time line which acted as the catalyst for one of the biggest factors in the meltdown. I think the date should be enough: September 11, 2001.


[2001-2003]

We all know what happened on this date, since it has changed the course of world history as we know it. This one event is probably the single most important event in this generation's lifetime and also the first snowflake which snowballed into the current crisis situation. When Al-Qaeda declared epic war on America, the USA reacted in a typical redneck way. They decided that since one asshole wants to mess with us, we might as well take down his whole country. And so they launched an attack on Afghanistan, with the aim of finding Mr. Impossible-to-find, and in the process make a complete fool of themselves. While this was going on, in the process of killing one person they spent a total of $172 billion, killed around 45,000 extra people, destroyed one nation's economy and then spent an additional few dozen billion rebuilding that same economy.

As this was going on some soldier glanced westward and saw an interesting piece of land with a whole lotta oil. And then he thought, since we're in the neighborhood, we might as well take it. So a certain American President Jr. decided to avenge the embarrassment faced by his father in the same office and created a few reasons to declare war on a dictatorship. At that time in 2003, the world opinion was biased towards capitalism and pretty much everyone supported this second war for their own reasons. The people supported their leader, the soldier followed his orders, the communists were happy they weren't being targeted, the investment bankers saw an opportunity of rebuilding another economy and all the industrialists saw black gold on the horizon. (Keep in mind the American credit card debt at this time was $73 billion and already $172 billion has been spent in Afghanistan).


[2003-2007]

Soon the Iraq war was in progress and the businessmen were happy, they had countries to invest money into and a war to entertain them, at the same time they were counting on the fact that once the war was over, all the oil from Iraq would help reduce their long-term costs by a substantial amount. But what happened since then has been the most documented and most ridiculed few years of the American Government. The government started facing opposition for the war quickly, and once the promised quick result didn't arrive the public became enraged and the government was quickly blamed. But the main factor in the global melt down out of this is the cost. (Overall the Iraq War cost $856 billion and a total of $3 trillion to the economy).

At this time, a number of economies around the world were flourishing thanks to the foreign investments. The rich countries around the world were investing their fortunes in a number of countries and these economies were again flourishing and re-investing in other economies. Markets like India were considered a gold mine investment and quickly the economies started going up. Slowly these economies started getting the jobs meant for America and people started depending on credit cards to maintain their lifestyles. Now the rich-and-influential-of-the-western-nations started getting richer and the comparatively well-off American started getting poorer and as a result started getting greedier.

They started investing money into any resource possible, the idea became that any rich person had the Midas touch and the assumption became that any investment will flourish. As such two things took center-stage; greed and stupidity. What was once a sound investor became overconfident and greedy. The investments became vast and the credit card became man's best friend. (On the time line we are in the year 2007 and credit card debt stands at $800 billion, the Iraq War is costing $856 billion and the Afghan conflict carries a $172 billion tag).


[2007-Present Day]

Now we reach the home lap. The year is 2008 and the world economy stands at a very precarious angle. Everyone is rich. Anyone can afford the high-life. The Iraq War is a disappointment. American unemployment is rising. Investments are diverse and international. The whole world economy is interdependent, and all markets around the world are inter-linked. A slight fluctuation in any market affects the world. And banks are realizing that the shit is about to hit the fan.

Suddenly, the bubble explodes when all the numbers add up. 8,281,000 people are unemployed in the USA. These 8,281,000 people are adding to the credit crunch. The War on Terror has cost the American tax-payer $3 trillion. American banks are sitting on over $800 billion in unpaid credit card bills and successful investments are a rare commodity.

All these factors are just the numbers, in reality all this debt was being handled somehow until 2008 owing to the fact that these banks managed to recover their international investments which paid back the dividends and the money equaled itself keeping the bank afloat. But in mid 2008, the investments saturated. The economies around the world stopped growing at an infinite rate and the dividends reduced. Suddenly the banks had no incoming money while the citizenry kept living on credit cards. Soon the water started churning and the banks started sinking one by one.

What happened next is economic history. It has been the culmination of a series of events in the last one and a half decade which has included a number of bad decisions. The main factors in my opinion have been the one's I stated above; war, greed, bad investments, credit cards and government policy. How they all snowballed into this shitstorm is what economy students will be learning for ages to come.