The Financial Fuck-Up by Robin Ramsay
Monday, October 6th, 2008
I haven’t blogged for a while because…..because the only item on the agenda is the financial fuck-up and I’ve been preoccupied trying to read about and make sense of it. (The Internet is wonderful and terrible at the same time: more than enough information rapidly becomes far too much information.) But here some more or less random thoughts on the present chaos.1. None of this is a surprise. The mountain of debt encouraged by central bankers in American and the UK was bound to topple over at some point. Bubbles always burst. Lots of people have been sounding loud warnings but to little effect.
2. The current mess resembles the Nick Leeson/Barings affair: senior management had no idea what the drones on the dealing floor were doing but didn’t care as long as the profits rolled in. When it went wrong they simply didn’t know what had been going on.
3. Most of this mess is a consequences of computers. Without computers much of this elaborate trading could not be done. I read one account which compared the present situation with The Invasion of the Body Snatchers: the pods have opened but they contained not aliens but computers…
4. So complex is the web of trades, futures, derivatives, no-one has any clear idea of which bank is in the shit and who is trustworthy. The result is that all banks now assume that all other banks are about to go bust and the result is the credit freeze.
5. In the country the one step the government could have taken but didn’t to loosen up the housing market was to pump money into the remaining mutual building societies.
6. I knew the world had changed when Gordon Brown talked of nationalising Bradford and Bingley. When Northern Rock was more or less nationalised, that N word was studiously avoided by Brown and Darling. I presume the change of vocabulary has been prompted by polling which tells them that the punters like nationalisation again (at least where the security of their deposits is concerned).
7. The mess is entirely the fault of the politicians: they set the rules by which the moneylenders operate.
8. No-one on the government side of the Commons seems to have any economic knowledge. Brown, Darling, Yvette Cooper and the other minor Treasury figures seem utterly at a loss. And well they might: the world they have built – or allowed to be built in the City – is crumbling before their eyes. Will they return to their old world-view? No they won’t. That’s the meaning of the return of Peter Mandelson: he was one of the pioneers among NuLab figures in advocating globalisation (which in UK terms means doing whatever the City wants) and his return means we are going to have the same old same old but with some tweaks and lots of stupid Brownian rhetoric about the need for global rules.