Some Thoughts on the Financial Crisis and the Importance of Wisdom

Last Friday, I got a call from my mother. “What’s happening with all of these banks failing? I just signed up to make regular deposits into ING, do I need to be worried?”

I explained to my mother that the Canadian financial system was in better shape than its counterpart south of the border and that her deposits were insured by the federal government and as long as she had less than $100,000 in savings, the government would have to pay her back if the bank did fail. I told her it was pretty much an impossibility for the Canadian government to go bankrupt and that short of a global financial apocalypse her money would be safe in ING for the foreseeable future. She laughed at the thought of more than $100,000 in savings.

This conversation was a turning point for me. It was the first time anyone I had spoken with had been worried that the credit crisis (which we are now roughly 18 months into) might affect them personally. I was flipping through files at home this weekend and realized that our life insurance policies are with AIG. It turns out that if the US treasury hadn’t acted to keep that company afloat, we might have been without life insurance.  That’s not really a big deal but it is a part of my life.

Yesterday, the US House of Representatives voted against a plan aimed at addressing the continuing financial crisis.  The stock market then promptly drove itself of a cliff and went into free-fall.  For most of the afternoon, my colleagues in the office were pacing and checking their portfolios and watching thousands of dollars in investments evaporate in minutes.  It was not a pretty picture.

I continue to wonder what the church might offer the world as the limits of modern capitalism continue to be brought sharply into focus.  As political and business leaders continue to struggle with how to address a problem of this scale and complexity, I’ve been thinking about an essay I recently submitted for a course called Christianity and the Political Economy of Capitalism:

The credit crisis is linked to the fact that the entire capitalist system, as it exists today is a kind of shell game. Fractional reserve banking and complex global institutions have created a system of staggering complexity which no one understands. After eighteen months of following commentary on the cause of the problem, its potential effects and possible solutions, it has become apparent to me that the crisis in not understood by even the brightest minds modern economics has to offer. In fact, the crisis itself was caused by the clever manipulations of thousands of very brilliant people. Analysts at investment banks and rating agencies and brokerage firms were all doing their best to outsmart one another and managed to drag us all over a cliff that anyone might have seen if they had just stopped long enough to look.

My reflections on the credit crisis have underscored the unbelievable importance of humility and wisdom for the Christian who hopes to think about (or practice) modern economics and capitalism. For all the expertise and brilliance of those who ramped up the American housing bubble, they did not have wisdom. They did not have wisdom because they were arrogant and they did not believe there were limits. By contrast, we [Christians] must strive to be aware of our limits and the limits of our broken world.