Where did it all go Pete Tong?

My last post was'nt my greatest so I think I should write a new post to cover that one. I've become slightly addicted to various podcast's from historical speeches by Churchill himself to the history of the Euro. I've learned about the US Guantanamo esque camp in Ethopia to the route causes of the current crisis. It has confirmed to me that I'm actually quite sad and a bit geeky.
I've been really interested in the progression of the 'crisis' and trying to predict how it will develop. I'm by no means well informed but it seems to me there has been 3 root causes to this crisis; short-termism, greed and poor risk analysis. We all suffer from greed, it's inheriant in our make up. It may not be monetary greed but there will be some kind of greed. I'm a strong believer in the 7 deadly sins and I think how we manage them defines us. Greed, I think becomes a serious issue when found in a collective society because it goes from being something we try to push out of our lives to something that is actively encouraged (who doesn't want a pay rise, whether it's in the companies interest or not).
The crisis I think started in several areas, firstly we had had a long period of growth so were due a small downturn. Demand for housing grew quicker than supply (the buy-to let phenomen pushed demand up quickly) this led to an increase in prices. Rather than increasing supply or reducing demand (through regulation on second homes etc) the finance sector saw a potential growth market (i still hold that houses should be homes not investments) and increased access to credit. This is not necessarily a problem if the credit goes to people that can afford to give it back. However credit went to those who really couldn't afford it, through 125% morgages and the like. This led to a bubble, we all saw it and everyone with a few brain cells knew it wasn't sustainable.
Predictably people got themselves into so much debt they couldn't pay there repayments and with a downturn in consumer demand and high oil prices it exacerbated the problem. Thus putting some banks (Northern Rock and Bear Stearns for example) into serious problems. Once that happened banks suddenly went into an ultra cautious approach realising they had big liabilities and a lack of trust in other banks. This creates the snowball we have seen that banks stop lending, finding difficulties in capturing their loans back.
The public who now have big debts that need to be paid off stop spending and essentially put consumer markets in trouble. This cycle continues until we have the big corporations in the world struggling.
What happens from here, well people can't get finance and stop buying homes, cars and other non essential items (homes are essential but a few months extra with parents, or in the small flat is doable) Governments have tried to pump money (stimulus packages) into banks, to get loaning up again, which in theory starts spending. It has bought large shares in banks that looked as if they could fail to try and install trust in the market and use it as an apparatus to force loaning.
I think in general governments are doing the right thing. It's very easy to criticise them but I don't think it mattered what government was in charge, we still would be suffering this. I think that in the initial stages they should of done more to stop housing becoming a growth market. Stopping bad loaning policies would of helped but I think would of punished young buyers more than second home buyers. Something like a heavy tax on second homes may of created a better market for first time buyers and kept house value increases in line with inflation.
There is a good argument to say this started in America but honestly most countries have similar issues, it's just the scale of America that has exacerbated the problem and made it the tipping block.
What I think will happen next is that manufacturing countries will start to be hit badly, that's bad news in particular for Germany, Korea and Japan and to a lesser extent China and India (they still have domestic growth markets to support them). If manufacturing takes a fall then theoretically (I'm starting to sound like an economist. Heaven forbid) there will be less demand in natural resources, shipping and labour. I think that is where the buck stops (purely because then there will be nothing left).
What I think should be done? The govt's of the world need to provide capital. What concerns me though is if that they push for loans to be made then people will borrow when they can't afford it again. We need better lending before more lending. There needs to be better smart regulation (not more regulation) put in place before large sums of money are getting loaned again (news today of Northern Rock still having bad loan policies 6 months after nationalisation shows evidence of this). I think the banks will in time repay the loans given but I don't think this should be rushed or forced (politics and public attitudes will undoubtedly force early repayment). There is a danger that we could head for boom and bust years rather than sustainable growth if we rush the getting out of recession without changing attitudes amongst the public, especially in Britain. The government needs to change the saving attitude of British people, buying on credit is ok as long as we can afford it compared to our wages. We need to reduce our debts and then coonsumer spending will increase. An increase in tax free savings from £3600 to say a one year special allowance of £10,000 may help (not for spending though).
One area I don't agree with is the bailing out of the motor industry. The failures in the motor industry I don't believe are due to the credit crunch but are long term failings in the industry. Bailing them out will only postpone their failure. In my opinion capitalism is working here. It is showing us that there are problem in the industry that unless fixed will cause it to fail. In particular innovation has been lacking. If I had a 7 year old Renault Megane and was a little tight on money, what incentive or reason is there to buy a new car? The techonology in new cars hasn't really improved, cars look pretty much the same and there has been no real fashion fads (perhaps the reemergence of the mini cooper could count as one). The motor industry had such a great opportunity with the high price of oil to promote various fuel effiecient (not necessarily non oil) motors. We should be able to get small electric city cars cheaply, innovation in car design has been lacking. The reason they are not selling cars in because they are not offering us the right type of motors to make us interested in them.
The UK inparticular has particular indvidual issues. We need to get back to innovation and research. Something we do so well is attracting the greatest minds to work in our uni's and businesses. Our companies should be the next frontier in every industry. Innovation is not just technology and science but also business and banking. Banking innovation like mobile banking, social lending. A revolution of ideas need to occur because we are not a manufacturing country. Blaming foreign workers is misleading us from looking at the source of the problem, we're not leaders any more. Alot of our companies are now foreign owned. Why aren't world leaders like google British. It's not a lack of intelligence but perhaps a lack of guidance. We can blame the government but are we 'the people' asking the government for the right things or getting caught up in relatively small issues like politicians expenses and corporate bonuses.

I think this is the longest entry I've ever written, so if you have got this far congrats. I'd love to hear some rants.