On September 15, 2008, Lehman Brothers, the fourth largest investment bank in the US, filed for Chapter 11 bankruptcy protection following an exodus of most of its clients, huge losses in its share price and a devaluation of its assets by credit rating agencies. That was tomorrow four years ago.
We have spent the last four years reading, writing, thinking, analysing economic indicators, bond spreads, equity prices, interest rates, commodity prices and house prices.
Although we may all have an opinion as to what has caused the situation we are in today, there is not even agreement on this issue among the world’s leading analysts.
This means there is not even agreement on the solutions. Over these four years the crisis has mutated itself in various shapes and forms: starting from an increase in commodity prices; changing to the bursting of the property bubble; shifting to the toxic assets that banks had in their balance sheets; twisting itself into a credit crunch; forcing governments to recapitalise the banks; and ending up as sovereign debt crisis – all underpinned by a high dose of speculation, loss of business and consumer confidence, an increase in unemployment and negative economic growth.
Words and numbers have not been in short supply; what has been missing is the human element of this recession.
There have been a few winners, who have gained and continue to gain considerable sums of money at the expense of the many, who have got poorer.
These speculators seem to have no name and no face but they do exist, as highlighted also by the world’s leading politicians.
These are the persons that have caused the breakdown of the international financial system, with all its consequences, while they have amassed huge profits by doing nothing productive and simply moving capital around the world.
The losers have been many and these do have names and faces.
There are those who have lost their life’s savings as one financial scandal unfolded after another.
There are those who had believed in the honesty of financial markets and bought bonds and shares that lost most of their value in these four years.
As the credit crunch set in, investors found they had no more access to the capital they needed so much to run their businesses.
That meant that many of them had to go bankrupt, not because they were not competitive but because the banking system could no longer support them.
As businesses went bust and consumer confidence hit negative levels, the economic recession set.
There was always a doubt as to whether we would have a double dip recession or not.
In fact, after a weak recovery in 2010, many leading economies experienced either negative growth or weakened growth.
Governments had to cope with bailing out banks while at the same time stimulating their respective economies. If there was ever a case of scarce resources and unlimited needs, this was it.
Many governments simply could never have enough resources to finance the banks, continue providing services and ensure economic growth unless they raised taxes considerably. This has meant that millions of people no longer enjoyed access to social, education and health services as they used to before, irrespective of whether they could afford it or not.
It has also meant that pensioners have had to seek employment even though they may not be physically fit to do so.
The recession has meant an increase in the number of unemployed, while hundreds of thousands of young people have as yet to find employment. The number of persons that have fallen below the poverty line has also increased.
These have been the human faces of the recession, many of whom are sad and disheartened.
Malta has not experienced any of this so far. Thus one would expect to see concerned faces wondering whether we will ever have to face the same situation.
One would also expect to see relieved faces, thankful that the economic storm has not reached our shores.
However, we will always need to remember that behind the economic and financial data of the last four years, there are human faces that give a sense of the economic problems faced by a number of countries – thankfully Malta is not among them.