The price of everything

Unthinkable, Part II

“I saw an interesting thing today. A man was being arrested by the Military Police; probably an urban guerrilla. Rather than be taken alive, he exploded a grenade hidden in his jacket, taking the command vehicle with him.”

 

The various men look up as Michael eats his cake, wondering what the point of it is.

 

“It occurred to me: the police are paid to fight, and the Rebels are not.”

 

-       Michael Corleone (Al Pacino) in ‘The Godfather Part II’; screenplay by Mario Puzo and Francis Ford Coppola.

 

 

At first sight, the title looks melodramatic; then you remember what actually happened last year. Bear Stearns, Lehman Brothers, Merrill Lynch, AIG.. $30 trillion in notional equity market wealth destroyed.. unprecedented measures taken by the world’s monetary authorities.. a nuclear winter of complete distrust settling in on the global banking system. In that context, ‘The age of the unthinkable’ (Joshua Ramo – Little, Brown; March 2009) is aptly labelled.

 

There are many intriguing citings and conceptions in ‘..unthinkable’, but that of Deutschlands Geisteshelden is one of the best: a 200 square foot canvas by Anselm Kiefer to which the web is unlikely to do much justice;

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Ever get the feeling you’ve been cheated ?

“Get a grip on financial regulation ! Hedge funds, short selling, spread betting, leveraged buyouts must be curtailed. Regulate them hard ! Better, ban them !”

 

-       Reader’s posting (“PCMyrs, Tonbridge”) on the BBC’s G20 weblog.

 

 

Where to start ? With all due respect to PCMyrs, the financial crisis was not caused by the activities of hedge funds – a disparate and fast dwindling band of asset managers in any case following myriad trading approaches. It was not caused by short selling, either. For every short seller, there has to be a buyer taking the other side of the trade. One might as well suggest banning equity purchases, on the basis that they involve somebody else selling stock. This crisis was not caused by spread betting. It was not even caused by leveraged buyouts – although the recent rapid impoverishment of private equity fund holders was. If one can identify just one proximate cause of the Panic of 2007 - ..?, it was the uncontrolled growth of credit nurtured by weak regulators, fanatical central bankers and conflicted politicians, and supercharged by banks and, yes, greedy homeowners and investors. To suggest that ineffectual financial regulation should be replaced by the effective closure of free markets is akin to saying that because swimmers occasionally drown, water should be made illegal. Meanwhile, the G20 summit, in time honoured fashion, gave rise to all sorts of ludicrously unrealistic hopes of some “co-ordinated solution” by the participants. And workers in the City were obliged to co-exist, briefly, with a handful of yobs comfortably outnumbered but nevertheless goaded on by press photographers.

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