The citizen and the markets

The turmoil on the markets over the past few days merely confirms that we are living in an age of extreme – even total – flux. The planet seems to be made of up communicating chambers: from the rise in temperatures that affects climates and habitats in different corners of the globe to the lightning-quick financial transactions that link one side of the earth to the other every single day. The irony is that the absolute flux of the open markets has provoked the expression of fears that these markets are not fluid enough. So what happened? Carried away by the boom on the real estate market over the past few years, banks and mortgage firms in the USA started issuing loans to citizens who did not have the required solvency. As happens with every «bubble,» the greed of investors and their fear of missing out on a big party of profits led to the suspension of all necessary foresight and caution. This is a story that we have come to know very well in Greece. In the USA, this was the first major bubble to burst since the rise and fall of the so-called «dot com» firms in 1995 and 2001 respectively. (It seems that optimism generally triumphs over experience.) As long as money exists, it will always seek an outlet. With open markets and so many barriers having collapsed on the domestic level, all of us are influenced by developments in the farthest corner of the globe; so when the most influential market in the US getsa knock, we are certainly going to feel it. Over the past few months, mortgage firms have been on shaky ground and the impact upon the international credit system has been impossible to ignore. The Americans are being cautious, having reduced the size of the loans they are issuing and curbed their pledges for the future considerably. Cash reserves are running dry and this is causing turmoil at banks and hedge funds all over the world. These developments have also created concerns regarding the progress of the US economy and this is draining cash from the world’s stock exchanges. The European Central Bank was obliged to boost money markets by 95 billion euros last Thursday and by another 61 billion euros on Friday. The equivalent authority in the USA, the Federal Reserve, was also obliged to throw 45.5 billion euros into the market within 24 hours in order to keep interest rates stable and avert a dangerous slump in the economy. Whatever the manifold repercussions of this mini-crash may turn out to be, it has demonstrated that the actions of the individual citizen are capable of shaking the international economic system. In short, this is what happened: poorer US citizens were given the chance to get mortgages; the value of their homes was then exploited to develop a complex credit production system which dragged them further and further into debt; when they were no longer able to meet their payments, real estate market values started falling and so the supply and demand of new mortgages fell dramatically. This chain reaction provoked the current crisis. An air traveler can transmit a rare and dangerous disease from one side of the globe to the other in just a few hours. The pollution emitted from a manufacturer in the US or China can lead to ice melting and to the future flooding of our coastal areas. In the same way, the behavior of a foreign consumer can have repercussions on our own financial and real estate markets. However much we may feel that we are unable to influence international developments, today’s crisis is a reminder to all citizens thinking of borrowing, to banks investing in these dreams and to the officials who must ensure the smooth functioning of our societies that prudence and a serious approach are as important now as they were in the times of our grandparents. We should feel the same responsibility that our forefathers did regarding the impact of our actions – or inaction – on our fellow citizens and our environment.