Okay, so they were quick to jump on his mathematical ability, but, despite the little thanks Russell Crowe received, his Aussie fans know that he almost solved America’s financial crisis for them.
Sporting a distinctly non-Gladiator hair cut, Crowe told Jay Leno’s Tonight Show that, instead of the government looking for $700 billion to pay out the financial institutions, they should only look for $300 million and give $1 million to each one of the 300 million US citizens (episode aired 29 September 2008).
“Hah! He can’t count and he can’t multiply”, they said. “$1 million to each citizen is not $300 million; that’s only $1 each, you fool!” Instead of $300 million (3 + eight zeros), he needs $300 trillion (3 + 14 zeros), which is far more than the government’s desired $700 billion (7 + 11 zeros).
But, of course, as the rest of the world knows (and, indeed, someone as good at maths as our Russ would certainly know—remember A Beautiful Mind?), outside of the USA, a billion is a million millions, not a thousand millions, and, as most outside of the USA may not know, a US trillion is equal to an imperial billion.
And so we can rescue our hero from his present-day moment in the circus in front of a crowd roaring for his death if we allow for a slip of the tongue (i.e. he meant $300 billion), and his reckoning to be in the Australian/English system. Good old Russ was only after 3 +14 zeros instead of (what he had thought the US were after) 7 + 14 zeros. It’s a cheaper solution indeed!
Okay, so all those zeros make such numbers too huge to even contemplate. But in the debate over the nothings, the point seems to have been lost, and when it emerges, the Aussie doesn’t really seem to be the numbskull.
For some time, US financial instutions have been failing, and ordinary people have been walking out on their homes, unable to pay their mortgages. No matter how much economic wherewithall you have, obviously these two facts are somehow related.
It has become so serious, the government has been asking, “What should we do about the situation?” Three solutions seem to be obvious:
- Let the banks fail, and see what actually happens to the world. They tell us it would change life for the worse, but those who have been oppressed by the banks for far too long would really like to taste it and see. After whatever global readjustments would be forced upon us, what if it actually ended up being better?
- The government could bail out the banks. But, hang on, how does that help the ordinary people with the mortgage problems? Doesn’t it keep all their debts outstanding—their homes still lost—the banks still sitting pretty on property, and the rest? Is this really the better world we all want?
- Then there is the voice of Russell’s uncommon sense, despite the mockery from the crowds who are so used to crying for blood: give the money to the people! They can then pay their mortgage out, and, with their debts repaid, the banks will also be better off. Ordinary people can own their own home, breathe a sigh of relief, and then have more money in their pockets to spend. Then everything will be set for a recovering economy. (And they call the guy just another lousy actor!)
Well, the outcome is now known. After a tense week in Congress, on 3 October, the US government voted that up to $700 billion (7 + 11 zeros) be spent to buy up mortgage-backed and other securities from the stressed financial firms. The banks were rescued. But there was nothing about the ordinary person stressed from the mortgage in that scenario; their debts remain.
Now, of course, those who understand economics more than Saint Russ will have their much more complicated formulas and equations. But, in the end, they need to explain to the ordinary person why it is an essential part of the plan for the brave new world to keep ordinary people in debt to the financial institutions. That is what we all want to know.
Forces beyond ourselves; evil powers—evil, because they are making life worse, not better; forces working behind ordinary life to keep people in slavery … hey, have we discovered in the present banking system another manifestation of the new principalities and powers?
No wonder they won’t allow themselves to collapse and start again! No wonder they rescue themselves and maintain the ruin of the people.
Hi Peter!
I read your article with interest and have a few quick thoughts:
1. I understand that bailing out the banks sounds like it’s giving money to institutions (and their shareholders etc), and depriving real people who need the money. However, the reason why governments are so desperate to save the banks is precisely because their failure will affect practically every real person in the country. If a major bank fails, the ordinary person who saves and keeps deposits with that bank loses his life savings. This means that people on the street who have done nothing to contribute to the crisis will suffer. Major collapses will mean that everybody in the country loses out. Major collapses in the US will also mean that people all over the world will lose out (because of confidence issues) and almost guarantee a Great Depression akin to 1929 when so many suffered. So there is a firm logic to bailing out the banks.
2. The ‘ordinary people with mortgage problems’ are actually partially blameworthy. It is true that the current crisis is mainly brought about by the greed of the finance industry. However, it couldn’t have reached this point without the cooperation of people willing to indebt themselves beyond a sustainable level. A responsible borrower would assess his situation and commit to a level of debt that is consummerate with his income/assets etc. An irresponsible borrower would not do so and borrow beyond his means. Many of the current people with mortgage problems have done precisely that (borrowed irresponsibly), partly urged I think by the consumerist culture of America. That is precisly why there were so many defaults on mortgages, which ultimately sparked the crisis. So to give money to ‘bail’ these mortgage borrowers out is akin to bailing out irresponsible, consumerist behaviour. There is a thus a good reason to ‘leave people in debt’ to continue to foster responsible borrowing behaviour than to reward irresponsible behaviour.
3. The banking system is seriously out of whack at the moment, because of greed. However, in its neutral form, I do not think the system is inherently oppressive. In fact, it is crucial to the economy running functionally, and hence for the normal life for the average person to remain. Because of the money economy we are in, there has to be a system where money is ‘stored well’, and funds can be pooled together for productive activity (in the sophisticated forms of shares and bonds now). The banking system provides a fundamental role in such a system. Otherwise, we would ‘retreat’ back into a barter trade system or a subsistence existence (which, whether they are better forms of existence, is debatable but another question all together). What is needed is a reform of the system, and possibly the failure of some banks for a warning, but not the collapse of the whole system.
I felt prompted to give this feedback not because I love the capitalist system! I worked for 3 over years in a bank and that gave me a good glimpse of how ungodly the whole system can be! But I was concerned that a fair Christian understanding of the crisis needs a fair view of the economy. And I think that a fair understanding is crucial in this time when Christians and non-Christians around us are looking for answers and we would want to give them as true an answer as possible, for a good Christian engagement with the world.
I hope the feedback is helpful and am happy to be corrected on any points.
Chew Chern
Hey Pete,
The banks are sucking the lifeblood out of me as well! I mean they are taking money which I owe them because I wanted to borrow it, but my version (and yours too) sounds far better.
What’s that? I hear someone suggesting that I was greedy? That I went for the biggest loan possible, anticipating that rising inflation and increasing house prices would render my debt negligible over time?
How dare they. I blame the banks for that as well.
Chew Chern
In the interests of “good Christian engagement with the world”, let me challenge your comments…
But what our Russell (and Peter) were suggesting is that, instead of bailing out the people who should have known better, let’s protect the life savings of the people who entrusted their money to those people who should have known better. That is, instead of protecting the banks against failure which they brought on themselves, protect the consumers who had a reasonable expectation that their money was safe in a bank.
Sure, there may be some culpability on some of the borrowers. But my understanding is that many of the problem borrowers were very unsophisticated in their understanding of financial matters, and that in many cases the lending practices of the sub-prime lenders or their agents was fraudulent or at the very least extremely negligent. (Watch this episode of Four Corners and you’ll see the evidence of this.)
The culpability of the lenders and borrowers was not anywhere near equal, in my opinion.
The problem is, as Christians, we know that the system will never be ‘neutral’, it will always be driven by greed, and the whole market is predicated on winners and losers. And the problem is, how do you ever mitigate the greed if those being greedy don’t ever feel the weight of the consequences of their own greedy folly?
Just some alternative thoughts.
Ian
Hi Ian,
Thanks heaps for your comments, they bring much-needed balance into mine!
I agree with you that our concern should be protecting those who entrusted their money in good faith, and that the greedy rather than the innocent should feel the rod on their backs. I’m just not sure the best way to do it is the ‘Crowe’s method’. The Crowe’s method gives taxpayers’ money out to the people directly, in compensation for lost savings. Bank bailing keeps the savings of the people safe, so in a sense gives money to people indirectly. The additional benefit to bank bailing is the big-picture stuff: ensuring the stability of normal economic life and hence the ‘real’ businesses (like making Bolts and Crowbars
) which affect everyone, lowering the risk of a Depression, and the positive ripple effect on the rest of the world (and the US govt can’t afford to give a million to everyone in the world…too many zeros!). And the bailout actually gives a chance for the mortgage borrowers to keep their houses, because of the possibility of restructuring their debts so that they become payable in the end. So it’s more complicated than a ‘us versus them big bad banks’ dichotomy. In a bad scenario, I think bank bailing is still a good, although very imperfect, candidate for ‘overall good’. I’m thinking that the additional benefits it brings can outweigh the need of punishing the most culpable (and I totally agree that the culpability of those who try to wring money out of complicated, hollow financial transactions is much higher than that of the borrowers.) Maybe it’s ‘retrieval economics’??
Thanks for pointing out that the system itself will never be neutral. I agree, and think too that because greed will ultimately corrupt the whole system, more regulation is called for so that foolishness is prevented/mitigated (and isn’t it interesting how our sin bites us back, rather than ‘serve’ us, as total free-market economists would have us believe?). I was concerned about the possibility of Christians vilifying the banking system, and thinking that the wrong is all ‘out there’, at arms length from us (at least in this issue). I see the banking system as a little like the institution of government – never neutral because power corrupts, but given in God’s providence for earthly administration of justice. What is wrong is with us, not the system. And it’s not just the ‘big bad investment bankers’ out there contributing to the mess of the financial system, all of us can do that to a certain extent (speculating in shares? spending beyond our means?). So I was hoping to see that Christians will try to work out a way to use the financial system in a godly manner, so that it serves earthly existence rather than feed our sin (maybe that is especially the role of Christian legislators/regulators?), rather than make it the Wicked Witch of the West for the moment.
Well, evidently there is more to learn about the banking system and the world economy than I learned on Jay Leno.
But—to bring the musing back to the topic that I may have even side-tracked myself from—doesn’t anyone wonder about the rhetoric that is flying around at the moment? That we can’t let the banks fail, because the whole world as we know it will come crashing down. But, hang on, I thought it was God that upheld the world by his word of power (Heb. 1:3). When did the banks take over his gig? Isn’t this pseudo-god-like status of the banks a cause for concern? Doesn’t this sound like they have become part of the ‘principalities and powers’ that now keep everyone enslaved?? Just an innocent question from a non-economist.