It was bound to happen. The often touted, but spoken in whispers, demise of Lehman Brothers - and the realisation by the US Government that there is a limit to the amount of taxpayer money you can use to bail out wayward and, dare I suggest it, greedy investment bankers?
As western nations continue to "prod" Asia and others to get their financial houses in order, we now have more questions to ask about the ability of the west to look after itself, let alone provide advice to the "developing" economies.
Lehman has gone, strongly aided by the problems that existed in their commercial mortgage book (see my blog of 21 January 2008 - "What, Me Worry? - Yes, Me Worry").
Merrill Lynch has been saved, at a price.
Others look decidedly uncomfortable. AIG currently being the main case in point of course, and by the time you read this they may also be closer to the undertaker than the intensive care ward, but are we really so certain today about the likes of Wachovia and Washington Mutual? By the way, I am not casting doubts about their ability to survive, but they are prominent among the names I have heard over the last 24 hours at the SIBOS Conference being held in Vienna.
It has been an interesting conference, commencing as it did the day after "Black Sunday", but as I might have expected, I do get asked about the impact of all this "chaos" on Asia. In response, I think the best I can do is follow the succinct words of a friend whose biggest concern is the "psychological impact on the region". And I agree. (Ironic isn't it that psychological is made up of psycho and logical - a one worded oxymoron?) But I digress.
Asian economies, by and large, are in reasonable shape. They continue to grow, albeit more slowly than before, but they grow nonetheless. Meantime, courtesy of events unfolding elsewhere, wealth throughout the region is being adversely affected by the copycat falls in the Asian markets that ape the falls in western markets. Falls in Asia that are not representative of the reality of economic performance.
Sadly, there is more bad news to come out of all of this, but even now maybe we can learn some positive lessons from the west. For example, recognizing the fact that the future is never a linear extension of the past or the present. Understanding that markets are cyclical, which is a fact you ignore at your peril, as many seem to do. Also, in my experience it is rarely "different this time"; that is, problems often stem from similar roots, historically. And Governments as well as regulators need to recognize the value of understandable and enforceable rules and regulations, as well as the necessity for swift and decisive action. Or even determining, equally swiftly and making clear that they are going to take no action, leaving the market to find its own solutions Through no fault of it's own, Asia has been done a disservice by the "developed" world (well, the USA actually) - a real case worthy of Laurel and Hardy's famous catch phrase that I have used for the title.
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