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Tuesday, September 16, 2008

History in the Making

These days most of us are going about their lives as usual: work, school, family... And yet the events of the past few months, and especially of this week, are probably nothing short of history in the making.

The American government bails out the two largest mortgage companies. Three out of the five leading banks in Wall Street are no longer with us. The largest insurance company is asking the government to throw it a lifeline. And the world stockmarkets are in a freefall.

We are all immediately affected by this "financial tsunami", through our mortgages, our savings, our pension funds and the value of our home. Yet these are merely the immediate effects and there is a much bigger picture to consider here. In the words of Alan Greenspan, this is a "once-in-a-century" crisis.

The banking system, unlike other parts of the economy, is built on trust and that trust has been eroded to a dangerous degree. The US government made a courageous decision by not saving Lehman Brothers at the last minute, preferring to send out a message that this mess needs to sort itself out with market forces. But this is a huge gamble, one that places the entire market-based economy approach to the test, the results of which may alter our lives in ways unimaginable (some say unthinkable) at this point in time.

By definition, it is not easy to discern clearly when history is being made. History is a hindsight business. But I'm paying close attention, as years from now I might find myself telling my grandchildren what life was like during the turnpoint year of 2008.

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