Does the interest rate for home mortgages in Ireland affect common Americans? Due to nature of international finance the answer is now a resounding yes. Lending rates are now tied to bond and stock markets, which are no longer located only in London or New York.

A firm in Beijing might have purchased and sold a note for a home mortgage in New Jersey dozens of times without the homeowner even knowing. The debt crisis in Greece triggers market reactions in Tokyo and Stockholm. While bankers might note that this system offers the advantage of providing more opportunity than ever to tap into financial resources, the current credit crunch shows that capital investment is not the primary concern of big banks anymore. Banks are now enormous trading house that attempt to hedge investments so that there is no chance of loss. The problem with this set-up is that the market then has every opportunity to fall to pieces.

The market supposedly exists to get money into the hands of investors, but when the banks panic the entire economic system grinds to a halt. Rather than build or create, engineers and other talented workers wait for markets to correct themselves. Banks have one duty — to make money. While it might make sense on their balance sheet, stock trading hedged so that the bank never losses means that everyone else must absorb the losses.

The impact can be seen in the threatened pension plans that state governments administer. Pensions rely on tax contributions and are invested in the market, but if the investment goes sour due to purchasing toxic assets nearly every group within the society is injured — except the banking system. And unless the pension advisor is an insider or an elite economic genius then trading with the big banks is a game of poker where the other side sets the rules.