I thought it might be worth recalling easily ignored and quickly forgotten examples from the recent past, which threatened the global fiat currency systems, banking and economic stability.
As Samuel Longhorne Clemens, or more popularly Mark Twain wrote so accurately: "The one lesson we learn from history: is that we never learn from history!"
What is quite astounding to myself, is just how only a short time past, hard lessons are apparently discounted in the insane venal dash for instant wealth.
The Wall Street Crash was simply speculation gone mad: investors were commuting pensions and life assurances in order to speculate on stocks: and despite the then "High Tech" activities of the day, automotive manufacturer and radio suffering repeated early profits warnings from all major corporations, such were ignored in the blinkered Lemming-Like stampede for capital growth!
The Dot.Com Bubbl;e emulated the Wall Street Crash with eerily similar features: indeed, one major Wall Street Investment Bank was "boilerhousing" tech stocks even as they knew the market was tanking.
History provides us ready examples of blind speculation fever and its inevitable results in the South Sea Bubble and the Dutch Tulip scramble.
In 1969 a tiny unexploited Australian Nickel Mine, Poseidon was the focus of an insane price speculation, as sanity was abandoned in the venal and blind belief in instant riches:
In 1969 Poseidon, a small mining company, discovered a vast nickel reserve in Western Australia. The discovery pushed the company’s share price from $1 to a February 1970 peak of $280. By December 1970, Poseidon’s share price had plunged back to $39 as investors placed a more realistic valuation on the reserve. The company went into receivership in 1976.
http://www.wealthfarm.com.au/articles/.html?aname=getting-the-edge-with-managed-funds
However, more recently, we have seen Asia melt down; thanks to blind and insane speculation (1997).
http://faculty.washington.edu/karyiu/Asia/articles.htm
The root weakness of Japan's economy and financial systems, today, were seeded in greedy myopic speculation in real estate and investment instruments.
http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e070220
The 1980s saw the eventual collapse of Mike Milken's Drexel Lambert boutique financial outfit, which led on Junk Bonds, themselves employed to feed the capital needs of the LBO (leveraged Buy Out) frenzy: Milken served federal time in the slammer.
In the late 1970s the game was Eurobonds, placed through the global capital markets and mainly lending vast sums to emerging Latin American states: classic Sovereign Risk financing.
The core premise was the obligors (Borrowers) were of dubious rating; so the scheme was to charge them higher-than-market interest rates for their loans.
Let's look at this a while: they could not afford to borrow the cash and service the loans: so, we'll make the loans and charge even higher rates for the risks!
They defaulted.
Surprised?
What fueled the Sub-Prime meltdown was precisely identical mentality.
In desperation to climb onto the house ownership carousel, often minimum wage Americans took not just one but two or more sub-prime rate mortgages: and in many cases used their credit cards and unsecured personal loans to raise the necessary deposit!
This time around, however, the financial World enjoyed a whole new series of Derivative Instruments to cloud reality and dupe foreign investors, buying the debts via packaged investment instruments.
In Japan, then Asia, then Europe (Late 1980s Britain, mainly) house ownership fever inflamed imaginations and placed brains on hold.
The eventual disaster saw personal bankruptcies climb to the stratosphere, massive mortgage foreclosures and many living with severe Negative Equity (i.e. their mortgage debt was far larger than the value of their house).
One could be forgiven for thinking that as Blair and Brown came to power with their New Labour administration in 1997, the financial and economic meltdown engineered by Thatcher and her cohort Lawson would be fresh in people's minds. Perhaps somewhat assured by Brown's triumphant and apparent promise "No more boom and Bust!"
Could have fooled me.
Same old; same old.
In point of fact far worse: Brown, with Blair cosily looking on, allowed consumer borrowing to explode: and by 2005, residential property represented 66% of Britain's Total Wealth (Source, Office of National Statistics).
It is no wonder therefore, that in order to fund this insanity, capital had to be imported from abroad: since UK plc had not thrown off residual capital wealth from core, sustainable real wealth generational (And thereby job generational) economic activities since the early 1950s: it's been downhill ever since.
China is now headed towards precisely identical problems: instant new wealth has placed brain in cold storage: and property prices and speculation on investment assets is reaching fever pitch: expect correction soon.
One is therefore forced to pose the rhetorical question: will we ever learn?
I'm not holding any breath!
November 2010
Tuesday 28 June 2011
I am going to re-publish here, articles from 2004 onwards, which I first wrote as Columnist on Global Economy and Business for Axis of Logic.
I don't write for that Webzine anymore as it gradually moved away from its core premise of non-political partisanship and drifted at ever increasing pace to become a sort of Marxist-Socialist site.
Perhaps worse, as Axis sought contributors, their real knowledge and comprehension of the increasingly arcane and confusing World of economics and Capital Markets, came second to their willingness to bend the knee to discredited socio-economic theories and polemic.
For the record, I am wholly opposed to the present reality of so-called "Free Market" Capitalism: rather, I believe Free Enterprise is essential when it is correctly and fairly mixed with State Intervention.
As with all things in life it's about balance: or ought to be.
If we really want to change the World, then this can only be achieved by Series Step Change: not the sort of Quantum Leap revolutionary stroke propounded by dedicated Marxists.
Like wine and almost everything else, there's good capitalists and there's bad capitalists. Unfortunately, the past 30 odd years have allowed the Bad to overcome the benign and often swamp the altruistic intent and motivations of the Good.
It is quite clear to myself, that those who propose and encourage "Revolution" clearly, have no real concept of actual revolution: they've never studied and absorbed the clear lessons, for example, of such as the Spanish Civil War. Which was a revolution.
Such "Fomenters of Insurrection" seem to lack the clarity of thought and consequence: whilst excoriating the evils of Big Capital, they seem to conveniently ignore the identical malfeasances of Big Socialism; their constant mantra is "Socialism Good- Capitalism Bad!"
Sadly, life isn't like that: if only it were! If everything were to be Black or White with no shades of gray in the middle, wouldn't everything be simpler.
Thus I am a Centrist: I believe socio-economic systems can extract the very best that both Capitalism and Socialism have to offer and meld the two into one system offering far greater levels of equity: and additionally, the excesses of one can be offset by the moderating influences of the other.
The only clear alternative, otherwise, would be Libertarianism. Which, considered rationally, would simply replicate the Draconian excesses of the 17th century.
Why?
Simply because of the inescapable reality of human nature: the twin frailties of human nature being opposed in synergetic counterpoint.
Greed on the one part (And uncontrolled greed not moderated by statist intervention): and the human being's natural fecklessness on the other. Logically, unrestrained, unfettered greed would win.
Unfortunately the enabling power of the Internet has allowed many writers to verge on conspiracy theorist, as they constantly repeat ad naseum the kooky nonsense about The Illuminati, Bilderberg, The New World Order, the Rothschilds (And how they own the US Federal Reserve!) and the rest.
One is rather surprised more "Alternative News Sites" haven't asked David Icke to write for the site! You know, the nut who devoutly maintains that HRH Queen Elizabeth II, George Bush and others are actually descended from reptiles!
When endeavoring to engage in meaningful debate with dedicated hard core Marxist-Socialists, I've found one common trait: if I use a particular Socialist nation state and its attendant socio-economic disasters as an exemplar, the response is "Ah! But that is not a "Real" Socialist State!"
Well, the proponents of Socialism have many handy examples to chose from!
One that's often cited is Cuba: to which I respond, "Well, then why wasn't Silicon Valley - you know the place which developed the technology you are presently using to have this discussion in the first place! - based in downtown Havana?"
The conclusion was, I wanted to open up my writing to a wider (and less myopic) audience.
I welcome your thoughtful and polite comments.
MCF
June 28th 2011
I don't write for that Webzine anymore as it gradually moved away from its core premise of non-political partisanship and drifted at ever increasing pace to become a sort of Marxist-Socialist site.
Perhaps worse, as Axis sought contributors, their real knowledge and comprehension of the increasingly arcane and confusing World of economics and Capital Markets, came second to their willingness to bend the knee to discredited socio-economic theories and polemic.
For the record, I am wholly opposed to the present reality of so-called "Free Market" Capitalism: rather, I believe Free Enterprise is essential when it is correctly and fairly mixed with State Intervention.
As with all things in life it's about balance: or ought to be.
If we really want to change the World, then this can only be achieved by Series Step Change: not the sort of Quantum Leap revolutionary stroke propounded by dedicated Marxists.
Like wine and almost everything else, there's good capitalists and there's bad capitalists. Unfortunately, the past 30 odd years have allowed the Bad to overcome the benign and often swamp the altruistic intent and motivations of the Good.
It is quite clear to myself, that those who propose and encourage "Revolution" clearly, have no real concept of actual revolution: they've never studied and absorbed the clear lessons, for example, of such as the Spanish Civil War. Which was a revolution.
Such "Fomenters of Insurrection" seem to lack the clarity of thought and consequence: whilst excoriating the evils of Big Capital, they seem to conveniently ignore the identical malfeasances of Big Socialism; their constant mantra is "Socialism Good- Capitalism Bad!"
Sadly, life isn't like that: if only it were! If everything were to be Black or White with no shades of gray in the middle, wouldn't everything be simpler.
Thus I am a Centrist: I believe socio-economic systems can extract the very best that both Capitalism and Socialism have to offer and meld the two into one system offering far greater levels of equity: and additionally, the excesses of one can be offset by the moderating influences of the other.
The only clear alternative, otherwise, would be Libertarianism. Which, considered rationally, would simply replicate the Draconian excesses of the 17th century.
Why?
Simply because of the inescapable reality of human nature: the twin frailties of human nature being opposed in synergetic counterpoint.
Greed on the one part (And uncontrolled greed not moderated by statist intervention): and the human being's natural fecklessness on the other. Logically, unrestrained, unfettered greed would win.
Unfortunately the enabling power of the Internet has allowed many writers to verge on conspiracy theorist, as they constantly repeat ad naseum the kooky nonsense about The Illuminati, Bilderberg, The New World Order, the Rothschilds (And how they own the US Federal Reserve!) and the rest.
One is rather surprised more "Alternative News Sites" haven't asked David Icke to write for the site! You know, the nut who devoutly maintains that HRH Queen Elizabeth II, George Bush and others are actually descended from reptiles!
When endeavoring to engage in meaningful debate with dedicated hard core Marxist-Socialists, I've found one common trait: if I use a particular Socialist nation state and its attendant socio-economic disasters as an exemplar, the response is "Ah! But that is not a "Real" Socialist State!"
Well, the proponents of Socialism have many handy examples to chose from!
One that's often cited is Cuba: to which I respond, "Well, then why wasn't Silicon Valley - you know the place which developed the technology you are presently using to have this discussion in the first place! - based in downtown Havana?"
The conclusion was, I wanted to open up my writing to a wider (and less myopic) audience.
I welcome your thoughtful and polite comments.
MCF
June 28th 2011
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