The smaller they are the bigger they fall

In times of crisis there are always winners and losers and the financial crisis has been a triumph for a big business. For small businesses however, it has been a disaster as this BBC report illustrates. It shows how small business owners in the USA are now being denied credit by banks and even having existing agreements withdrawn. Large corporations on the other hand continue to borrow at will and as we’ve seen with the bailouts, even receive huge handouts from the Government.

I listened to a retrospective on the BSE (mad cows disease) crisis last week and one of the points that came out was that it was wonderful for large farming conglomerates. The collapse in the market for British Beef devastated small farmers in the UK, most either going bankrupt or committing suicide.

Such crisis help big business flush out small competitors and leave consumers at the mercy of a handful of corporate giants who reap even greater profits in the aftermath and reduce both commercial diversity and choice for the consumer.

The legacy of the financial crisis will be concentration of financial power in an even smaller number of hands.

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Bush’s burst bubble

Lawrence B. Lindsey, Mr. Bush’s first chief economics adviser, said there was little impetus to raise alarms about the proliferation of easy credit that was helping Mr. Bush meet housing goals.

“No one wanted to stop that bubble,” Mr. Lindsey said. “It would have conflicted with the president’s own policies.”

An interesting story here in the New York Times where White House insiders explain how it was Bush’s own determination to encourage people to buy their own homes that was a major factor in the credit crunch that lead-up to the financial crisis. Nobody at the top wanted to confront him over his own personal Messianic mission.

This is what happens when political targets and economic goals are put before plain common sense. It was obvious to anyone with even a basic grasp of economics that the country could not go on borrowing like it was. In Bush’s blind attempt to increase the wealth of Americans, he’s actually ended up impoverishing them instead.