Money makes the world go around, but we've evolved from a subprime crisis to a global slowdown. Was this all due to the Banks? the Media? Or various factors?

David Bloch, CEO of the Brightwater Group comments:

Last month’s question asked who was to blame for the Recession. 37% of you thought it was the Banks, 20% The Media and 43% Various factors. I’m sure it was due to various factors, but I believe the Media, who simply thrive on bad news fanned the smoke into a roaring flame.

Banks have been targeted as never before, but the banks are merely a manifestation of capitalism, the system we have cultivated and mostly thrived in. What surely happened was simply that Banks become too powerful and started believing their own hyperbole.

Banking is one of the oldest professions in the world, and it started off as a very simple means for people to keep their money safe. It developed into a central financing system which backed businesses and even government projects. What happened was that banks kept evolving and wanting to make more and more money and simply moved beyond their remit NB. I am referring more to commercial / merchant banking than retail banking. The banks didn’t just back businesses, products and services, they created a plethora of “financial products”, sold them to each other and assigned value to these paper assets. Over the last 20 years, and particularly over the last decade, banks made huge fortunes on the basis of these paper transactions. Concepts of worth and value that they themselves attributed to financial products they bought, sold and traded. What has happened is that the house of cards has been revealed for what they are.

While various factors including the banking crisis did contribute to the global slowdown, I do feel that the media in particular are revelling in the current economic gloom and fanning the flames into a roaring bonfire. While the media did expose the banking downturn for what it was, a mere illusion, they also created a nervous discomfort amongst consumers who genuinely do not understand what has happened within the banking sector and rely on so-called experts in the media to explain it. Personally, I’ve never spent as much time reading and watching the news, gripped by horror akin to watching a Horror Movie. Two weeks ago I watched with astonishment as Sky News explained that inflation was down and then interviewed 2 experts on the dangers of Deflation – just when I thought I was getting some good news! This has forced a domino effect whereby consumers refuse to spend, thus hurting the smaller businesses and ultimately the whole economy. The constant barrage of crisis stories has undermined the most solid part of our economy - the consumers and businesses outside of the banking and financial services sector. The banks too, in this uncertain climate and with glaring headlines predicting their eventual demise, start turning on each other instead of joining forces to re-instil confidence in the economy. One story tells of how Goldman Sachs started to short sell Lehman Brothers when they were in difficulty, hastening their demise.

Ireland has experienced burst bubbles before, most recently in 2001 with the dot com collapse. However the most notable thing about that particular crisis was that at least the IT sector was based on something real and tangible and it took relatively little time to recover. Property will eventually recover too. The banking sector illusion is more serious and until there is a true World Bank, and some form of World Central System of Governance, then economies will continue to be subject to bubbles and their inevitable demise.