The Death of Kings by Nick Paumgarten is his interpretation of the global financial crisis. In his naming of the crisis as a ‘death of kings’, he is referring to the people who, according to him, are greatly affected. He says that one needs to be a participant in it and goes on to talk about investors and business men comparing their realization of the crisis with old times. During such times, it was easier and more visible to the point that all one had to do was attempt an A. T. M withdrawal, which if you were unable to make were a victim of the crisis. In his article, he cites members of the business community to whom the crisis may have been obvious but were still affected, and still those who had some foresight but still suffered the effects. He also mentions some who may have been in situations that allowed them to save money in that they were not in dire need of borrowing – be it in mortgage or finances. In his mention of the crisis catching up with some, he expounds how they recognized it in their realization of the unnecessary luxuries they enjoyed (Paumgarten, 2009).
The global economic crisis has for the past few years been haunting mainly big businessmen and institutional investors. This year, however, with the dawning of a new leader in the world’s super power, even such heavyweights feel the impact of impending doom. Some of the world’s biggest economies have slowed down with a number of sectors being directly affected including borrowing and lending, housing – in the area of mortgages, labour, export, tourism and foreign direct investment – just to name a few. For many lenders, it has led to increased difficulty to get funds from wholesale money markets as well as the increased inter-bank lending. This in short means that lenders are finding it more and more difficult to raise the finances needed to fund their lending. For the consumers, the cost of borrowing has increased highly and become almost impossible even as the lenders attempt to protect themselves through greater charges in attempts to make profits and increase their pools (Paumgarten, 2009). They have done this through increased interest rates on mortgages, loans and credit cards. Another way in which they are doing this is increased criteria for acceptance. It seems that the consumer is suffering while the lender remains able to sustain himself. The limited access to finance affecting the consumer also has a rippling effect in the area of mortgage which is also suffering. The financial turmoil has led to reduced options for the consumer as mortgage lending limitations increase. This leaves no choice to the consumer and they are now literally against the wall.
One of the villains of this crisis has been pointed out to be the former American president and his administration: President Bush and his campaign “the Ownership Society” which suggested that home ownership was the best way forward for all Americans. This played a big role in increasing the mortgages given out to home buyers in earlier years of the crisis. This when a long way in increasing the reserves they held thus enabling them to lend even more. This was a new model of lending developed by banks to increase their reserves (Paumgarten, 2009). However at this time when the economy has hit rock bottom, they lack the means to pay back those funds. Some banks, in an effort to survive, closed off some of their investment branches.
This further caused panic among the masses thereby leading to further erratic behavior that can only be translated into economic turmoil. The home ownership campaign led to fewer rules and less oversight which led to the current situation. Initially, there was an assumption that the economy would improve with time. When it didn’t, government sponsored entities became bankrupt, there was collapse of investment banks, people started being laid off their jobs and the government then rushed into offering an a rescue package – the proverbial golden handshake – that would eventually cost them an arm and a leg in taxes.
As the global economic recession continued to hit banks and asset companies, the government offered a plan to bail them out of the crisis. It had however come to a point when the banks did not even trust each other as they were not sure their money would come back to them. In such a situation, imagine the difficulty of investors’ and common man’s everyday activities. Cheap money policies that had been invented to stimulate the suffering economy were not working. This meant that financial advisors lost all credibility: both for coming up with new policies that did not work and again for not for seeing how bad the crisis would turn. They indeed have been viewed as insignificant and the cause of the big problem (Paumgarten, 2009). Another group of people viewed negatively in the crisis are those who made bets on the downturn of the market and in turn made a lot of money out of it. These are indeed condemned for their money making schemes. Yet another related group would be that of the growing economies of China and India, which despite a predicted downturn of nine percent they will now only suffer a six percent loss. In regards to the common man, he has experienced a reaction of utter shock. People have plans to work until about ninety five (if even possible), there are great drops in home values and jobs are harder and harder to come by.
With the shrinking markets and further dry up of credit, organizations continue to predict increased layoffs thereby increasing the problem to common man. Many disagree on whether the proposed amendments are good or bad and in addition most individuals are in a state of fear, confusion and panic. We are all facing much harder decisions than before: the grocery store or the cash pump, cash machine or all at once, the conditions are tough and most of us feel the pinch and indeed the pain. However in so many forgotten corners of the world people are making decisions about their very survival (Paumgarten, 2009). For these people, the struggle with putting a meal on the table, such as when and from where the next one will come from still remains the big question. This is a major reflection on the plight felt by all and the uncertainty constantly creeping about us.
Paumgarten, N. “The Death of Kings: Notes from a meltdown”, The New Yorker, 18 May 2009, 40 – 57