LONDON – It was once described that the differences between continental Europe and the United States were buffered by the United Kingdom, who resides in the middle. All three parties represent different systems, values and standards of capitalism and socialism that have been argued ad nauseam. Regardless of those differences, they have found one another in a shared economic quandary.

We have killed our gods and discovered that nobody knows anything

What is most scandalous about this economic occurrence is not how jarringly sudden it was to experience. It’s how jarringly sudden it really wasn’t.

The signs were always there and so were the numbers. In the UK there had long been the conversation about the insinuated “dirty dealings” of bankers. But the conversation usually stopped there with a hearty “yeah, probably” sort-of-laugh and then a change of subject. While the general sentiment toward bankers may have been as crooked as their reputation, the majority of the British people had enough blind faith in the institution to let this tainted dynamic fall to the side.

For years, France, along with European Union member Germany, have articulated short of boasting how their socialist ideals of regulating financial institutions have been the right way of thinking all along. Diplomatic correspondent for the New York Times, Mark Landler, penned that France President Nicolas Sarkozy left a summit meeting in Washington last November in a “triumphal mood, declaring [the summit] had tamed the animal spirits of American capitalism.” Sarkozy the Great put capitalism, the true social disease, in its place.

But the tide has changed. The economic ocean has ebbed and exposed a financial world where we have globally learned that those insinuated “dirty dealings” were in fact dirty dealings; that the animal known as “American capitalism” was globally feral and knew no borders; and that the gods we created were in fact a figment of consumer imagination.

Après “le collapse” le déluge

It seems we have reached that age as a global economy when we realized that our “parents” were actually human, and learned that nobody really knew what they were doing. That is a startling place to be because it means we have to be accountable for our own actions and our interactions with one another

Sam Yehya, an economics major in the school of International and Comparative Politics at the American University of Paris, spoke about the morality of the this global situation.

“Its all about the asymmetrical information,” said Yehya.

In economics and contract theory, information asymmetry deals with the examination of decisions where one party has more or better information than the other. This creates an imbalance of power, which can sometimes cause the transactions to go awry. This is where the morality issue comes into play.

“Financial institutions would grant loans to people that shouldn’t have been eligible, and then sell those loans to other institutions,” said Yehya.

The loaning of money has been the hot button at the core of this financial mess and it is affecting every aspect of our daily lives.

Carly Gouviea, a San Jose State University international business major, is seeing the economic crisis in France hit home.

Gouviea’s aunt, an accountant for a high-end furniture store, has been recently receiving calls daily from banks demanding repayment on their loans.

“I know that is extremely stressful for her because she has to tell the banks that they don't have the money to give them right now,” Gouviea said. “Her store is in the process of liquidating their supply since it will be closing soon.”

Michael Pina, an industrial design major at SJSU studying abroad in Paris, noticed the rising and unexpected costs of simple commodities. Pina says that trying to stay within his limited budget “has been a nightmare.”

Although the economic distresses have recently been noticed in the worlds of fine goods and regular living expenses, the financial world has been well aware of the “nightmare.” To many Londoners it was the collapse of Lehman Brothers and the Merrill Lynch in September 2008 that marked the chapter in an unmanageable year. Once-proud financial institutions were tumbling down as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate ventures.

In the months that followed, the world watched as our countries scrambled to patch a leaky roof with a tarp. Stimulus plans, job cuts and slashed interest rates — the “credit crunch” was a phrase soon to be coined.

The European Union began strategizing their shared currency issues and how they would protect one another’s economies.

The shame came; President Sarkozy persuaded top bank executives to renounce their bonuses this year in an attempt to inject fresh capital into the government. And then came the blame, with Sarkozy denouncing “the remuneration of those we call traders, these young people who play at speculating. That has led to the catastrophe we all know about. That's what we have to ban.”

In the UK, the number of people who are unemployed has risen past two million, according to Britain’s Office for National Statistics, and economists are now speculating that it will rise to three million next year. More locally, California is experiencing a 10.5 percentage of people who are unemployed pushing their number of unemployed citizens to over 3.4 million.

Although a sympathetic Prime Minister Gordon Brown considers this a “personal regret,” as told to the Commons, it did not stop passionate conservative leader David Cameron from exclaiming that this was the fault of the Labour government and “the British people will never forget it.”

Getting to work

“A recession is when your neighbor loses his job, a depression is when you lose yours.” While the quaint populist bromide on economic downturns rings true in America, the UK and France have been too busy to create an equally fanciful saying.

The European Union has recently pushed for a larger loan from the International Monetary Fund. They have made it clear that despite the protests and strikes, this money will not be used in a stimulus attempt. This tried-and-risky quick fix would invariably end in deflation.

In the UK, marginal spending revenues have remained consistent, but that’s where they remain — on the margin. Although there is impact in other areas, such as savings and other investments, many Londoners speculate that the true brunt of this will be felt in the third-world countries that produce the UK agriculture and other commodities.

Most recently, the Czech prime minister Mirek Topolanek, whose country holds the rotating European Union presidency, has vocally opposed the U.S. plan that Treasury Secretary Timothy Geithner announced last week to buy at least $500 billion of existing assets and loans, such as subprime mortgages that are now in danger of default. 

According to the official Czech news agency, Topolanek told the European Parliament in Strasbourg, France, that the huge proposed financial injections into the economy are a repetition of mistakes from the Depression era of the 1930s. "All of these steps, their combination and their permanency, is a way to hell," Topolanek said.

This week, world leaders from the G20 countries are meeting at the London Summit. Although the international banking system has fallen, world leaders will be engaged in a conversation fervently centered on enabling our world families to weather this economic storm; restore, reform and strengthen the confidence and trust in the global financial and economic systems; and to have a sober conversation about creating a new sustainable global economy within the context of a new vigilant world devoid of the blind faith that served us in days prior.