While the consequences of the credit crunch appear all too apparent, the intricacies of the complex financial instruments involved, combined with the vast sweep of the global financial system, seem to defy explanation. Attempts to accuse negligent regulators, fraudulent brokers and greedy borrowers cast much blame but little light on the causes of the crisis.
Are the current problems a sign that the developed world has been living off credit for too long? The United States is still by far the world’s largest and wealthiest economy, so why for so long has it been reliant on credit supplied by the smaller and poorer economy of China? In the past 30 years, the UK economy has shifted away from manufacturing towards financial services. In many ways London is the pre-eminent world financial centre, but is this a source of weakness rather than strength, leaving the UK more exposed to financial crises?- Institute of Ideas
Bio
Phil Mullan
Phil Mullan is an economist and business adviser. Author of The Imaginary Time Bomb: Why an Ageing Population is not a Social Problem, he researches, writes and lectures on economic, demographic and business issues.
Formerly chief executive of the internet services company Cybercafe Ltd, which opened the world's first internet cafe, Cyberia, he currently works with a range of businesses. This includes a non-executive directorship with Easynet Group PLC, one of Europe's leading business broadband networking companies.
Michael Savage
Dr Michael Savage is an investment banker with interests in financial economics and development. Prior to working in the City, Michael taught international political economy and studied international relations.
Stuart Simpson
Stuart Simpson is the convenor of the Institute of Ideas Emerging Economies Forum - researching the economic, political and cultural impact of the dynamic growth of much of the developing world. He has published various articles on these themes in print and online publications, including the Independent, Die Welt, spiked and Novo Magazine.
Stuart has conducted research on behalf of the education charity WORLDwrite, on issues such as the impact of corruption and governance and the affect of debt relief on development.
Stuart is a qualified accountant and has worked in the financial services sector for many years. He is now employed by a leading European investment bank monitoring treasury and commodities trading activity.
Stuart is currently engaged in the study of financial mathematics at a postgraduate level.
U.S. central bank system consisting of 12 Federal Reserve districts with a Reserve bank in the principal commercial city of each district. The system is supervised by a board of governors in Washington, D.C., as well as by various advisory councils and committees. As a result of the Federal Reserve Act of 1913, all national banks are required to join the system; state banks may join if they meet membership qualifications. The Federal Reserve is responsible for monetary policy. The original act set fixed reserve requirements for the U.S. fractional reserve banking system. It allowed each district bank to determine its discount rate, the rate it charged on loans to member banks. The modern Federal Reserve resulted from the Federal Reserve Act of 1935, which allowed the board to determine reserve requirements within defined limits. It became responsible for approving the discount rates of the district banks. Most importantly, the act created the Federal Reserve Open Market Committee, which is responsible for conducting operations in financial markets that increase or decrease the amount of reserves in the system. If the Federal Reserve wants to ease monetary policy, it will use open market operations and increase the amount of reserves through the purchase of financial assets. Conversely, it can tighten monetary policy through the sale of financial assets.
Measures employed by governments to stabilize the economy, specifically by adjusting the levels and allocations of taxes and government expenditures. When the economy is sluggish, the government may cut taxes, leaving taxpayers with extra cash to spend and thereby increasing levels of consumption. An increase in public-works spending may likewise pump cash into the economy, having an expansionary effect. Conversely, a decrease in government spending or an increase in taxes tends to cause the economy to contract. Fiscal policy is often used in tandem with monetary policy. Until the 1930s, fiscal policy aimed at maintaining a balanced budget; since then it has been used “countercyclically,” as recommended by John Maynard Keynes, to offset the cycle of expansion and contraction in the economy. Fiscal policy is more effective at stimulating a flagging economy than at cooling an inflationary one, partly because spending cuts and tax increases are unpopular and partly because of the work of economic stabilizers. See alsobusiness cycle.
If you look down on large, Chinese cities from Google Earth, you see rows and rows of "apartment buildings," (similar to the South Side of Chicago). This "Government Housing" cannot hold much "stuff." Perhaps, we will be saved by a future Chinese Suburbia. Is that what your vast intelligence has to offer, Michael Savage?
I wish Savage was joking. Clearly such a single-minded speech could not deserve him the place he is in. He has no idea how the world economy works together, only assuming dumping trash over the other side of the wall is the way out. If you want to stop the crisis, stop producing the trash! "They don't have all the luxury things we have in the West..." Savage, you must be living in your own cube world, don't you? Haven't you heard people laughing around you? Get a room.
I'm not certain that this man has a complete grasp of postindustrialism. He's covered the financial sector, but he's totally omitted the designers, engineers, teachers, and artists that make the ideas that keep post industry viable.
Additionally he seems not to understand that consumption is required to uphold employment rates. Without American consumption all of the 'nonessential' manufacturing jobs would fall through leaving the Chinese workforce (a third of the world's population)jobless and with no marketable skills.
member. 
