Yesterday attended a very interesting talk of Carlo Jaeger who gave a seminar in our School of Sustainability. He presented a long term view and systems analysis of the financial crises and this led to different insights than we hear in the popular debate. Carlo wrote an article on his main message in the Financial Times 2 months ago.
There has been a long disbalance of imports and exports. USA is importing more than it exports for a long time, while countries like China and Germany export more. The earned money was used to lend it to USA, Greece, etc. This mechanism worked fine until the irresponsible banking activities led to a financial crises in 2007/2008 and governments bailed out banks and had to borrow more money. The actors with money surplus (including companies (like Apple)) start to hold their money due to uncertainty in what are good investment options. The increasing interests rates are largely caused by distrust and uncertainty, not because of financial realities.
Carlo Jaeger argues that institutional changes are needed to provide incentives for those actors with money to invest it to increase productivity growth. This could be done by a focus on investments in a green low carbon economy: retro fitting of buildings, R&D of renewable energy, etc. Not all these investments will be green, but stimulating an upgrade of the infrastructure will create jobs, investment opportunities, innovation, and a lower energy bill.
In his talk, Jaeger showed a lot of data from the 1930s depression which was resolved by World War 2 when there was a large investment in the military complex. Such a solution to the current economic crisis is not desirable. An alternative major focus would be a serious investment in a low carbon economy which will repay itself by the savings it will costs in the long term.
Unfortunately, the fact free politics of today is likely pursuing other solutions and may dig deeper holes.