Some time ago a friend forwarded to me an obituary. Not his in anticipation nor, happily, mine. I filed it away because I knew it would come in useful one day - as it had clearly been useful before. An obituary, lamenting the passing away of common sense. I suggest you read it by clicking on the link before you read on.
If the structured finance crisis was not already enough to demonstrate the toxicity that a mixture of greed and insanity can bring, then surely we learnt the lesson that paying out millions of dollars in compensation to Chief Executives of institutions that had been brought to their knees was not morally acceptable; particularly to the people in those same companies who had lost their jobs. Didn't we?
Okay, so the amounts are now lower, but the headlines scream as loudly. Today's UK Daily Telegraph newspaper greeted its readers with the headline "Failed bank chief is £2m winner". This, of course, relating to the ousted head of HBOS, who has presided over the failure of a bank where, at the time of the forthcoming merger with Lloyds might see a loss of upto 40,000 jobs, according to some estimates (a little overdone, in my view). Oh - and he gets to keep a job in the new organisation!
In the meantime, across the pond, incredulity remains that a company like Lehman has gone, the folk at Bear Stearns who were rescued thank their lucky stars for achieving "first-loser" advantage, AIG were happy that they were too big to fail (insurers to the Government perhaps?), while toilet paper sellers are still doing a roaring trade around the offices of the likes of Morgan Stanley, Washington Mutual and Wachovia Bank. Everywhere across the globe, speculation is rife about the future - and now the US Government has acted to help shore up the world economies by chucking a couple of hundred billion US dollars at it!
Well, at least the markets have reacted positively today in response to this (rather late) gesture - but the British Government, in case they are uncharitably feeling a sense of schadenfreude, can take the smile off their faces if they think they have acted expeditiously and smartly; think Northern Rock first of all, and then heed the words of an adviser to Hong Kong's Monetary Authority and to the Bank of England (now former adviser), Sir Charles Goodhart, whose view was that HBOS might have survived if the Government had acted more quickly. Back on the lap of poor old Gordon Brown - blamed again. It seems, they say, that if you meet him, make sure he doesn't wish you good luck!
But is all of this enough? Despite the market rally, have we now bottomed out in the west or is it just a temporary "happy blip" to make us feel better over the weekend? To be followed by the stark reality that on Monday morning we will still not have created any more jobs, an increasing number of people will realise they can no longer afford the rent on their swanky apartments, and the credit card repayments will continue to come under pressure.
No I do not think the world is coming to an end in financial terms, and we will muddle through eventually, but common sense not only suggests we should not live beyond our financial means. It also means that beyond finance, we should not condone (by turning a blind eye) the farce that appears to be Zimbabwe and other similar situations; that hiding behind religion - whichever one - is not an excuse for terrorism, and that many other of todays idiocies (see next blog; "Non-Compete Clause") could be addressed appropriately by a strong dose of common sense.
Let's hope there is a cure for the apparently deceased.
Comments