Econ:)

[Sophist]

You can’t control what events impact on you but you can control what you learn from the impact.

 

Now here’s a challenge. Write 400 words about financial services without mentioning the credit crunch. Bugger - just fell at the first hurdle. Composing this article a month before publication means having to predict the climate. Yeah - it’ll be raining – funny haha. But what will have transpired at Lehmans for instance? Any further share price falls and my mother may consider offering half a month’s pension for it. At the time of writing the Korean Development Bank is having a long hard look. And here’s the rub. The head of KDB used to run Lehman’s Korean offices. They employ him, train him, reward him and he buys ‘em up. An allegorical story for the new millennium maybe?

 

It rather reminds me of Britain’s industrial revolution. We Brits invented just about everything and then we displayed it to the world at the Great Exhibition only to find that within 50 years that world had noted our ideas and improved upon them. Duh! Today we have an underground transport system, a city sewage grid and numerous other amenities that were state of the art 150 years ago. Well let’s face it; many today have difficulty identifying a difference between the tube from the sewers. Our infrastructure is a bit of a busted flush; pun intended. How did I get from Lehmans to the sewers? I imagine Nick Fuld is asking a similar question.

 

The connection is that whilst we in the west have developed a complex and comparatively well regulated capital markets, we have also developed a remarkable ability to consistently bring it to crisis point - generally once per decade for the past 40 years. Until now we’ve had the luxury of unpicking our errors as the rest of the world calmly waited for normal service to be resumed. Was there ever a glimmer of a suggestion that anyone east of the Suez would buy a western bank during the crises of the 70s? How about during the crash in the 80s? Or the collapse of Barings, LTCM or the tiger markets in the 90s?

 

But now, having trained the world and rewarded it the non-west have noted our ideas and are improving upon them. The rest, as they say, is history. Why for instance should the Muslim world beat themselves up trying to get Sharia complaint products to work within our Capital Markets system? Because it’s the only system in the game is the smug answer. Well not forever buddy. I’ll wager that within a decade there will be a competing Capital Markets based on different values, regulations and modus operandi founded on the principles of Islamic finance. Where would you rather have your money? In a system based upon moral teachings or in a system consistently manipulated to create wealth for those prescient enough to bail out before the particular bubble of that particular decade bursts? For my part I’d keep my money in our system because I’m a greedy mug and because I’m accustomed to my finances going up and down quicker than Paris Hilton with a video cam (1). But the vast majority of our world expect simple returns on their money in exchange for the simple safety of it. Some poor forsaken family in Newcastle is about to lose their property and everything in it because some clever kid with a good sales pitch managed to flog his bank an investment in AAA shacks in Virginia. Next time he has a penny to invest will it be with the Bradford and Bring me Money or will it be with the Osama and Abdullah Co-op?

 

And so as I conclude – I can hear the collective sigh of relief – it seems we are all learning lessons but it is likely that those who will gain most from our errors will not be us who will continue with the same routinely corruptible system of capital markets but those who seek a better system altogether and one that will not mirror our credit crunch debacle. Curse! Fell at the last as well.

[Valenteenah.]

Ha ha...funny piece. He's got a point though, globalisation is a double-edged sword. Sooner or later the West will lose the 'dominant financial markets' mantle.

[Yaabka-Yaabkiis]

^^^ i dont think so ....

[Sophist]

Its Not All Doom and Gloom – Nooses are still cheap!

 

Well that’s the good news; according to an article in Funeral Weekly the cost of burying yourself has never been cheaper. Why am I reading Funeral Weekly? I’m not. I made it up. Given the hike in commodities I imagine the bill for throwing yourself off the tower would give you a serious stroke. But then it’ll not be a major priority in your story as you’re scraped into the cardboard box – hey, may as well be green at some point in your life if even it happens to be the last one.

 

We turned off Bloomberg for a day just so we didn’t have to hear the continual pitter patter of bad news dribbling out 24/7. It worked! Then one of my consultants thought it good idea to pick up the phone and let the outside world in.

 

And it is not all doom and gloom! The world is a smaller place. As a result of far too many lunches and dinners it may well be argued that the world isn’t smaller, just that I’m considerably larger. Be that as it may, the fact remains that the gloom is but a local lonely cloud. A very big local cloud pretty much covering the entire North Western hemisphere from Prague to Pittsburgh in fact. Judging by the summer (someone sue someone for calling this a summer please) we’re suffering, the cloud is also full and endlessly so. But this all needs to be taken in perspective; and not just a global perspective but also an historical one.

 

The North West (Europe and North America) has ruled the roost for years, indeed a good few hundred. Ever since we nicked the trade-wind maps for the Indian Ocean from the Muslims in the 1500s we in the West have pretty much done what we liked to the rest of the world and wars, hunger and genocides aside we (in the West) seem to have reaped a great deal of wealth from it. Well those living in Russia, China, India, the GCC and Africa are neither crying tears for our woes nor are they moping around crying over the collapse in the price of their house. Indeed for most nationals in those countries until the 90s, the price of their house was darn near the same price that their ancestors paid for it a few centuries back.

 

What the world is witnessing is the nascent origination of a new world order. It is embryonic so please give it time to grow into an adult – about 20 –30 years should do it. Money is power. Always has been, probably always will be. No empire, no civilisation, no nation state or coalition of them has ever dominated without having the financial muscle to get there and then stay there. Wealth drives everything from building navies to universities to buying mercenary allies to setting the rules for Capital Markets. And we’ve spent ours. That’s all. No big deal from a global perspective and certainly nothing new from an historical one. We’ve run out of money and our credit ain’t what it was. And so we are seeing the birth – maybe it’s the actual conception as someone is definitely getting screwed – of a new, more global, more balanced, more equanimous power. Where the new power comes to centralise remains uncertain, Dubai, Beijing, Mumbai, Moscow, the options are many. But certain it is that our old money is no longer legal tender.

 

So whilst we here in the West wallow in a mire very much of our own making have a thought for the billions of people out there who are so, so, so much happier than they were a century ago and certainly more so than we are today.