Sivu 1, 1:sta

Building instructions for a recession

ViestiLähetetty: 20.10.2008 18:37
Kirjoittaja Antti Roine
Recessions and downturns do not arrive by coincidence, they are tailor-made things. The building of a recession starts by selling at a high price the shares, which were bought after the last downturn at a giveaway price. This money may then be invested in more stable targets like precious metals, exchanges, Swiss bank accounts or land. At the same time, it is important to obtain influence over the press and other media and over the political decision makers.

The next stage starts by spreading rumours of recession with a low profile, i.e. behind-the-scenes, to the press and politicians; always using the existing negative news of occasional losses, bankruptcies and the overheating of the economy, etc. This helps to activate "wise" opinion leaders who can sense weak signals. This makes them repeat warnings of recession to the press; which needs accidents, disasters and rumours to promote sales. When this news has been repeated long enough, then citizens start to believe in the imminent recession.

In the third stage, it is very difficult to stop the knock-on effect when the snowball is already moving. At this stage, the best way to speed up the ball is to activate the political decision makers and opinion leaders to convince us that we need not worry at all, all our bank accounts have been secured, there is no recession coming, etc. However, people are suspicious and do not believe anything any more.

In the fourth stage, the majority of shareholders wake up and start to sell their shares at any price to salvage everything that can be saved. The citizens start to panic and stop consuming. This increases unemployment and people have to sell their properties in order to be able to live and pay their loans. This will still increase the slippery slope. This is the time when the recession speculators start to harvest the fruits of the recession by buying valuable properties at a rock-bottom price from private persons and companies.

Many private persons, companies or even big countries with large cash reserves may act as potential recession speculators. The recession and decline makes it possible to convert large cash reserves into valuable physical property at very low price and with legal means. The losers are, for example, those brave and honest ones who invested in new production technology with cheap loan money.

Our society does not need to fall into the playground of recession speculators, because our political system specifies rules for economic life. We live in a free market economy, which utilizes effectively the human desire to benefit from his or her own work. This system does not work, however, if the rules are not updated from time to time. All property and capital would finally end up in the hands of a few families without continuous development of legislation. The reappearance of the old class society cannot be the purpose of human life. The purest free competition means a war against everybody else, where nobody can win. This means that free markets needs to kept in check through rules, legislation and a humane civilization.

A stable banking system is one of our society's basic foundations, which brings continuity to businesses and people’s personal life. This will not happen if legislation allows banks to grant expensive loans to insolvent people and companies without sufficient guarantees. The worst thing is, if the law permits the multiple uses of the same guarantees in after-market products and derivatives. Such a chain will collapse like a house of cards when one link fails. In such cases, the only valid solution is the partial or full nationalization of the whole bank, which makes it possible to sell shares when the better times arrive. Of course the target of the recession speculators is the nationalization of the losses only, however, this not fair for the taxpayers.

Investments in expensive energy sources, reckless lending and too high salaries compared to productivity will increase inflation. Curbing inflation by increasing the basic interest rates will not help, because it does not tackle the basic causes of the increasing prices. In addition it has serious side effects on business. Actually, in the long term, it has just the opposite effect, by decreasing competition and increasing production costs. Of course the recession speculators demand the raising of interest rates, because they want earnings on their money, which is waiting for the recession. Reasonable bank, salary and energy policies offer much sustainable tools to fight inflation. Top corporate management and government should lead by example especially on the salary issue.

Countries and nations are not self-sufficient; we need to trade with each other. Currency exchange rates have an enormous effect on the competitiveness of world industry. To put it simply, international customers will not buy our products if the value of our currency is considered too high. This was tested in Finland at the end of the eighties when the Finnish markka was kept too high - Finns walked straight into the recession speculators’ trap. The value of the currencies may be decreased, for example, by lowering the central bank interest rates. Of course, the recession speculators do not like this because it does not suit their goals.

World economic welfare will also depend on the upcoming emissions trading agreements. These agreements will feed the downturn if the decisions are based solely on the “green dream”. The real risk is that emissions, industry and jobs will be exported to those countries, which care little about environmental problems.

The fear promotes regression, we stop consuming and this means unemployment and less tax income to the state. This is crazy - actually we all create the downturn. Ultimately, we can fight against recession by living in normal way, with a positive life attitude, and by encouraging companies to invest in the development of new products and sustainable technology.

Antti Roine, Ulvila 13.10.2008

Helsinki Times, 31 October 2008, page 2