Time to learn our lessons from the global financial crisis

Too much of a good thing can backfire, as it did in the case of over-zealous lending by banks

Has anyone got bored watching the news recently? Credit crunch, financial crisis and global meltdown - or variations of all three - are sidelining most other news.

Being exposed to the sheer volume of news and views on the financial woes, one could be forgiven to believe the world is going under - not so. But, hopefully a significant change in how money makes the world turn round is afoot. Or is it?

Looking behind the headlines and actually understanding why we are where we are is actually interesting enough to any of us to analyse as, yes, we are all affected, not just the investment bankers.

In the US the trickle down effect of the Wall Street crash has reached the countryside, bread baskets are threatened; in Europe jobs are being lost and reportedly 'poor' investment bankers so used to making a mint are selling up expensive homes and spending their 'pennies' at the psychiatrists.

And those who have always found themselves on society's fringes are likely to suffer further aid cuts. On another level, fairer trade deals seem even further off as richer nations are looking after their own.

Here in the UAE it has affected real estate stocks among others. Less access to credit could leave some developers high and dry, affect investor profits and end-users' ability to buy.

But we can count ourselves lucky, the large amounts of spare liquidity in the Gulf are likely to keep the wheels turning.

And indeed some of the money invested in the troubled West is bound to return. The region's stock markets are already recovering at speed, indeed a bit of upheaval adds spice and opportunity to the dealing and wheeling. Those who did not loose confidence snapped up stocks at discounted prices.

As Daman Investments' CEO, Shehab Gargash, puts it: "Dubai's shares dropping by 37 per cent was unwarranted and temporary bounce backs of 10 per cent in one day can't be sustained over many days - it's a reaction to an overreaction."

I can only agree, the crisis does seem rather dramatised in parts. It simply is the outcome of how the global economy with its ups and downs works and the world's financial sector goes about its business.

At the end of the day we have been here before. Some will lose and others will fight to live another day, so why make such a fuss?

"It hasn't happened on this magnitude for a long time, nerves are raw so the drama is going to kick in," notes Gargash.

"We're living in times where the economic drama is equivalent to watching a war on TV."

Well put, Gargash. But does this indicate that nothing has been learnt from the past, or is it that the powers that be are not capable or willing enough to avoid them? How come that governments help gigantic corporations, banks and stock markets which have managed to land themselves in troubled waters through mismanagement and in part profit greed?

Why should they not pay for their mistakes when an individual defaulting on his mortgage or loan is not given the same courtesy, but loses his home and more? Shouldn't banks living on debt and taking risks be dealt the same fate?

Shouldn't they be forced to close down and pay their dues, whoever took on the bad debt via credit swaps will have to bite the bullet and write it off as well, to their customers whose money they used?

Of course not, as it threatens the inherent system much of the world is built upon. Money is being injected, and to top the irony, it is the very tax payers - who are suffering the worst of the current conditions - being called upon to pitch in to help save the ailing financial institutions.

Why? So consumers and companies can continue to borrow from those institutions, and the economies built on over-investing into, not always but often enough, superfluous stuff can continue its cycle.

A bit of realism injected via a 'crisis' can't really hurt, can it? Maybe it will mean that attention will turn from trying to get too rich to a more sustainable economy for all. If one lesson can be learnt is that too much of the good times can backfire.

One of the main reasons for the crisis was the default of mortgage debt as property prices over-inflated and popped. Most people are forced into debt to buy a home, indeed it is encouraged, as this is how the system works - it isn't built on bricks and mortar but unrealistic numbers.

Hopefully overvaluing property will become a thing of the past and irrational profit expectations make way for reasonable ones allowing for sustainable housing.

Luxury is fun, but not everyone can afford it and rarely represents the 'real' value, determined by what people can afford.

Money is scarcer these days, and this is what the economic 'war' we see unfolding on our TV screens and read in the papers is all about. It isn't pleasant, but significant and worth thinking about.

There is no need to reinvent the wheel, but too much of anything can hurt even those who thought to be immune. More balance globally could be good
for all and prevent the house of cards from collapse.