The global economic recession of 2008 did not begin with events that occurred in 2008 but it was triggered by some of them. The most easy to identify were sales of mortgages in huge numbers to individuals who were not (and are not) able to repay them. In this process a phenomenon even more damaging to the fragile economic structure (although Citigroup with $2 trillion in revenue did not look fragile at the time) occurred and was inseparable from the sale of these mortgages - the attempt to remove responsibility for the actions of sellers and buyers.
The new millennia brought with it a new way of looking at mortgages. Previously mortgages were loans that allowed individuals to purchase something of great importance to them (a house) that was way beyond their ability to afford. If the mortgage were not repaid, the lender would have the house to sell and the house was worth more than the mortgage. The home owner looked forward to paying off the mortgage and owning her home free and clear, debt free, worry free. Home owners treasured their homes and lenders were secure in helping them acquire their homes. Borrower and lender knew one another and their relationship was often long-term. That was the old way of looking at mortgages.
The new way of looking at mortgages is different. A home is a source of cash, like a piggy bank, and the money in the piggy bank can be used to buy things that are not precious, such as televisions, automobiles, and clothes. Every month (mortgage payment) money is put into the piggy bank and if none is taken out, it goes to waste. Sometimes the money that is taken out is spent well (such as buying education for children) but often it is not. Eventually all the money in the piggy bank is gone but the monthly mortgage payment is still required. All is the same as before except that the piggy bank and everything in it (nothing) is now owned by a lender. Paying off the mortgage and owning the home free and clear, debt free, worry free, is not intelligent (and usually impossible).
In between the old understanding of a mortgage and the new a brilliant, different, and highly destructive way to make money was created. In the old way of looking at mortgages, lenders obtained a kind of ownership directly in the home that their money allowed the borrower to buy. The borrower was responsible directly to the lender and the lender was responsible directly to the borrower. This limited the number of people who could make money on each loan (the lender). Here was the brilliant idea that emerged: if hundreds of mortgages were purchased from original lenders and put into a pool, that pool could be sliced up and a kind of ownership in each slice could be purchased by many people (investors). The pool is refreshed each month as hundreds of people make mortgage payments on their homes but investors do not own an interest directly in any particular home. They own an interest in a slice of the pool of mortgages. This is the realm of mortgage backed securities.
It is also where responsibility disappears. The borrower does not know who receives her monthly payments (it's not the banker who originally made the loan - he sold it long ago) and she doesn't know who or how many investors own a slice of the pool that contains her - or part of her - mortgage). The lender does not know who pays the money that comes into his slice of the pool (and different slices have different values and ratings). The relationship between borrower and lender no longer exists. This is the beginning.
At this point, yet another new, brilliant, and even more destructive way to make money was created. Pools of mortgaged backed securities could be gathered into a pool of pools and slices of the super pool could be sold to yet more investors. Now even more people could make money from the original mortgage. No trace of responsibility now exists between the original borrower and investor. This is the realm of collateralized debt obligations.
One more thing is important. Investors who buy these "securities" (they are not secure) are not always individuals. They are frequently money managers who invest for thousands, or sometimes millions of "small" investors in their funds. People with money in these funds (like most retirement funds) are owners of a very tiny slice (shares in their fund) of a slice of a pool of pools (collateral debt obligation) or a slice of a pool of mortgages (mortgage backed security).
So much money was made by everyone in this structure that some very large banks (such as Citigroup) bought a lot of pools, slices and slices of slices and, like everyone else, found themselves owning "securities" that weren't worth much, or anything. When investors (the same investors, individual and institutional) realized that, they stopped investing in those banks, too. The value of Citigroup, for example, fell almost ninety per cent!
Why so much money was made by so many people before all of them lost so much is another part of the story, and a very important part. The point of this part of the story has to do with responsibility. The step by step deconstruction of responsibility resulted from an old and familiar understanding of power as the ability to manipulate and control. This understanding of power is now counterproductive to our evolution. It produces only violence and destruction. The amount of destruction that it can produce is visible in Iraq, the global recession, and every power struggle between individuals and between collectives.
The new understanding of power is so different from the old, so startling, transformational, and novel that at first it appears inadequate to be able to affect, much less repair, the deconstruction of responsibility that lies at the foundation of perhaps the worst financial catastrophe in history. Not only is the new understanding able to repair this institutionalized deconstruction of responsibility, it is the only thing that can. The new understanding of power is the alignment of the personality with the soul, the ability to choose consciously, wisely, and assume responsibility for the consequences of each choice.
The gap between the new understanding of power and the old is as huge as the chasm between love and fear, between the economy of scarcity (supply and demand) and an economy of abundance. The global recession that escalated out of control in 2008 is not a cyclic return to economic contraction that will be followed in turn by another economic expansion, although that may happen. It is a birthing pain of a new economy and new social structures that will accompany it.
Far beneath the vast political and economic consequences of a very conservative administration stumbling toward the nationalization of American banks, the implosion of the American consumer society, and the spreading of "toxic" investments around the globe lays a change in human consciousness and evolution unlike any before it. Like a tectonic plate in motion, everything above it is affected irrevocably. That change is toward responsibility, not away from it; toward sharing and away from hoarding; toward cooperation and away from competition; toward harmony and away from discord; toward contribution and away from exploitation.
Reconstruction of responsibility in economic and financial endeavors will follow deconstruction but the story is much larger than that. Both are symbolic of a species-wide change in human consciousness that is dramatically changing individual and collective experiences in challenging and profoundly positive ways and will continue to do so throughout our lives.
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