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Global Finance

The state of global finance – how did we get into this mess?

John Hewison
Founder and Director
23 May 2012

I was thinking about the state of the world economies and how we managed to get ourselves into such a mess. Most certainly the GFC was caused by corporate greed and all too cute financial engineering; as a result many companies and their shareholders paid the price. But all this was aided and abetted by politicians seeking economic stimulus – like the US mortgage market.

Certainly governments played a part in stopping the corporate bleeding and threats to sovereign economic stability, but let’s not be deluded – they also made a lot of money as a result. The US government is effectively GMH’s biggest shareholder now enjoying profits and the Australian government made a tidy sum out of the bank guarantee. But the reality is that the corporate world acted swiftly in taking the hard decisions to rectify their woes but what we have now is a politically motivated and mismanaged mess of monumental proportions. Attempt at resolve is led by politicians with politically motivated agendas.

That got me thinking about how ridiculous the management of global finances is. Generally speaking, the world’s economies are being “managed” by people elected by popular public vote; they have no financial qualifications or experience and a philosophically motivated agenda with a time frame of around four years!

A great example of this stupidity is the current situation in France and Greece. After previous administration had governed their finances into a mess, the incumbent entered into agreements with the EEU to manage their debt repayment and future economic stability. Then they have elections and the new administration creates fresh chaos by threatening to change direction. Result – we all suffer the fall-out!

Where is the accountability? Where is the responsibility? Why is it that politicians can get away with gross fiscal negligence when the rest of the world’s citizens are held to account for their actions?

Although the IMF was created in 1945 to protect the world from itself by “stabilising the exchange rate and assisting in the reconstruction of the world’s payment system” that is, bailing out countries that get into unservicable debt. Recognising that Greece had debt equivalent to around 100% of its GDP when it entered the EEU in 1991, where was the gatekeeper? Surely the IMF (or someone) should have brought Greece to account a lot earlier than it did. 

As a professional financial planner and manager, I see it is as absolutely ludicrous that any individual, household or business would base their strategic financial plan on a four year time frame and yet we have the world’s global finances being managed this way.



Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.