"We Will Survive"

With the above words Tony Tan, Deputy Chairman and Executive Director of Singapore's GIC, concluded his remarks at a session of the Institute of International Finance's Annual Membership meeting in Washington DC last month.

I agree.

The world has suffered many madnesses in its history, and if you have never lived through one previously you will always believe that yours is the most extreme, the worst ever, the absolute end of the world, and that we should never allow such a thing to happen again. But are the problems we face today truly worse than previous disasters? I missed the Second World War but my parents did not - so I can only imagine what they and millions of other people, ordinary people, went through. My parents missed the crash of 1929, or were too young to notice. History is littered with examples, experienced I am sure by our ancestors. Disasters of varying degrees of magnitude beset us on a regular basis, it seems, but we always seem to manage to get through it. 

Certainly in such times, and sadly, people who should not suffer - often do so. While others, already at a relative advantage perhaps, find ways to turn the crisis into an opportunity. (And do not be misled into thinking that the word for crisis in Chinese, weiji or 危机, actually means both danger and opportunity; lovely theory though it may be, it seems that whilst wei is indeed danger, ji means something like "incipient moment; crucial point, when something begins or changes. Which could, I suppose, give the idea of opportunity – or it could mean more trouble. But I digress).

In plotting the course of this particular crisis, it does seem that the severity of it has been underestimated all the way down the line, with the result that each Government or Economic Bloc's solution has proved to be nothing more than a band-aid, requiring more and stronger medicine on a regular basis. There are signs, however, that we are getting closer to some kind of stability, albeit still very fragile, and I have no doubt there is more to come.

There are questions that will be asked, once the dust has settled, and I am sure there will be additional regulations imposed as a direct consequence of some of the answers. There will be people considerably more erudite than I am who will provide all the economic arguments you want to read; so many arguments, in fact, you may also become as confused as everyone else. And they will tell you what, in their view, was the cause and the real effect and how it should have been spotted, (some will even tell you that they did spot it, but no-one listened) and stopped.

There will be comments from all quarters on the role of the investment bankers, the politicians (what elections??), and the people who decided they would no longer pay their mortgages for no better reason than there was no recourse to them as borrowers. There will be stories of the inappropriate selling of investment products to the wrong people, of rising inflation and how - in the end - the era of low interest rates that had created an overleveraged society brought about the "American Crisis". (Well, we like to call it that in Asia because we were pretty quickly dubbed as having the Asian Crisis a few years ago. A crisis that taught us many lessons, since heeded).

But, we will survive. We may take many years to return to the sort of free-wheeling lifestyles witnessed in various places, if that is really what we want to do, but I suspect we may be the better for it - until we forget all the lessons learnt and do it all over again.

Forget? Surely not! Perhaps the following few passages will give you a clue - 

"Bank failures we may have now and then, but not catastrophes like these. Our future failures, if any, will arise from imprudent banking, - from the locking up of deposits in unavailable forms of security..."

"The existence of Leeman's (sic) Act is another point in favour of our future outlook. Under that act, the broker who offers shares for sale must have the shares to sell. He cannot execute unlimited bear operations in the shares of any bank which he may select for attack and thus place its credit, and possibly its existence, at his mercy"

" The panics of the future will be influenced to some extent in their direction and force by the action of the public press. What any leading newspaper says today will be repeated throughout the land in a million or so news reports tomorrow"

Hmm; passages (a few of many) taken from "The Country Banker", a book by George Rae (a Scot, of course) first published in 1885! So - exactly what is it we have learnt in 123 years?

Comments

[Pixie]

Ah, history does not repeat itself, fools repeat it! Right?