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Eric Schmidt and Google Co-founders Larry Page and Sergey Brin

Google’s Eric Schmidt had a few words to share on what or WHOM he thought caused the financial crisis and surprise he blames America! But honestly, we knew this. Information concerning overpaid Wallstreeters created no wonder for us common as inevitably financial resources were exhausted so much so that the market was unable to keep up.

Schmidt says that in May 2008 he noticed a decline in the “metrics” that are used to measure advertising revenue from each click on a Google advert. All was not well in the land of Google.

“We couldn’t figure out why. Was it that people weren’t buying? We initially thought it was our error. Was it possible to make a mistake? Through the summer it was obvious that something had changed. It started in Britain in late May and I remember sitting there thinking what the hell is going on? Is this a trend, is this something unique to Britain? We now understand that it was a shift in consumer behaviour that was an early indication of what was to happen in banking.”

But Schmidt is certain of America’s culpability and wants to be clear “that the blame, to the degree that there was, is largely in the United States, not in Europe, not in Britain, and it was fundamentally because a low-interest policy created too much money. It was an easy-money policy and eventually an easy-money policy catches up with you. Remember what happened. Through a series of events in the mid-1990s, Congress increased the supply of credit for home mortgages, through the institutions Fannie Mae and Freddie Mac. They were essentially given too much money for political reasons. And then that was followed in New York by the repeal of Glass-Steagall which then allowed banks to use investment equity vehicles to create liquidity which creates very large amounts of money. So the banks are busy creating money and making a lot of money on that creation of money and the regulators were either, depending on your point of view, asleep at the wheel or did not have the tools to understand what was going on.”

Though Google stock itself is thriving in its third quarter even without their release of their revolutionary Nexus One last week, Schmidt does think about the million people who have lost jobs, or livelihoods or businesses and angrily recommends that bankers should stop lamenting about loss since ”the number of people who were hurt by the activities of the financial industry is so large [that] it is very hard to have a lot of sympathy with that industry given the high-flying nature of its behaviour, remember, many of these institutions privatized the gains and socialized the losses. [You could say] that the banking industry should not be regulated but it should also be able to fail — that’s called capitalism. It is very easy to understand. You’re a banker, you make a loan, and if you screw up you lose your job and the firm is liquidated. But if you pick any one of the financial companies [involved in the crisis] that is not what happened. What happened was the regulators decided that the pounding of the financial industry would have paralysed the world because of the inter-linking. I think that argument is correct. If your assumption is that there is a greater and greater concentration of large financial institutions that are too big to fail, well, they need to be more regulated. You cannot have a situation where you only win and do not lose in capitalism. At Google, if I lost $10bn in one day I would like to lose my jacket.”

We like the way you talk Mister, then again think of this. Schmidt admitted last year that the economy was taking a toll on Google and look where it is now! “”To fight that you have to actively manage the company. You have to take an aggressive position on investment, invention and innovation. And there are companies that have done this very well, for example Apple, which had a near-death experience and has come back with a tremendous performance, so it is possible to do it.

Agreed!

As one of most powerful CEOS in the world and co-chairman of this year’s World Economic Forum in Davos, Schmidt will be leading talks with Peter Sands, the CEO of Standard Chartered concerning 2010 themes of how ready we are to resuscitate the economy. He will also be heard by the likes of ”Bill and Melinda Gates, Howard Stringer, CEO of Sony, Sir Martin Sorrell, chief executive of WPP, Larry Page and Sergey Brin, Google’s founders, Lloyd Blankfein, chairman of Goldman Sachs, a sprinkling of royalty, a whole cadre of economists and academics and a fair few politicians including David Cameron and Tony Blair”, a powerful if not influential audience.

He says that ”it is easier for America to adopt permanent immense spending — the deficit that you can see — because of the role of the dollar as the world’s reserve currency.”

Also as a firm supporter of Obama, he commends him for the work he’s done despite the challenges he has faced in his first year as President.

Smart Smart Smart.