Midas Touch

Is it just me who finds this story more than a little bit worrying?

The Bank of England did not understand the severity of economic problems before the current financial crisis, its deputy governor says.

Sir John Gieve told the BBC that the Bank knew “crazy borrowing” was taking place and the price of houses and other assets was rising unsustainably.

But the Bank thought this problem was less serious than it turned out to be, he said in an interview for Panorama.

Well if the Bank of England didn’t understand the problem, what fucking hope did anyone else have?

Or is it more a case that some people did understand the problem – it’s just that they weren’t the people who really should have known/understood? After all, which sane person would think “I know, I’ll invest in lending money to people who have little-to-no chance of actually paying it back”? (After all, that seems to be the basic premise of ‘sub-prime’ mortgages)

And which sane person would base their plans on “OK, so house prices have risen [x]% this year, but they’ve done that for 10 years on the trot, so we’ll keep on expecting them to go up, (and borrow extensively on that ‘profit’) rather than get to an unsustainable level and then crash”. Oh yeah, lots of people did that second one, didn’t they? My mistake.

All in all, a totally fucking ridiculous situation.