Across the pond

Quite suddenly, in the last few weeks, most of the pundits on both sides of the pond, have started to say that what we are facing now is the worst financial crisis since the Great Crash of 1929, which led to world-wide depression lasting five or six years. In which many people in Britain and America had difficulty in finding enough money for basic necessities, let alone tbe products of consumer capitalism.

This time around the crisis has been in the housing market in both countries. Financial institutions have fuelled the dreams of people’s wishes to buy better houses for themselves, and become capitalists themselves by borrowing money to buy houses to let. Now they are in trouble, because they borrowed more money than they could afford.

And now the property market is plunging. Because people are being charged more for mortgages, if they can get them. And at the same time interest rates are being cut. So the banks (if they have not gone bust) are earing more by a widening gap between the rate at which they borrow and the rate at which they lend.

But some ordinary folk are losing their homes and others, who went in for buying to let, are in severe financial difficulty.

‘Ordinary folk’ for the purposes of this blog, includes pretty well everyone in Britain and America who is not super rich. For them, the purchase of a house is a much bigger spend than anything else in their lifetime. However much they know about finance they cannot regard it just as a property investment. They are buying a home, and for many where the home is, and when they have to buy it, is determined by forces quite outside their control.

Currently I am buying a flat in London to replace our rented flat. In the full knowledge that whatever I pay is likely to be more – maybe much more – than what the flat will sell for in the next two or three years. Maybe more than that. But if I hang around I might be dead before the bottom of the market.

Later on tonight, when I am in bed, the first of the television debates between the Obama and McCain will be taking place. Most of the pundits say that what happens in this first debate often determines the result of the election. Today’s debate is supposed to be about foreign policy.

But the pundits are also saying that American voters are more than ever concerned about the economy. Whatever either candidate says tonight will be said against a background of financial markets in chaos. So voters, and viewers all over the world, will be looking for clues about how well each candidate will do when it comes to managing a financial crisis.

Notsomuch as which candidate is tough and experienced enough to stand up to Putin, Iran or South Korea. But which candidate is asute enough to prevent the stock market panic pushing the world into a long recession.