Saturday, 21 July 2012

Made In London 1997




Like everyone else ive gone through 1000s of articles ect on the crash. The more I look at it the more it seems to me that the whole thing has Made in London stamped all over it. Libor, AIG the list is endless. How did we become the wild west of finance?

You might have missed Adir Turner on Monday, he gave this gem "We were only to a small extent focused on the activities of investment banks. We only had about five people on Barclays and five people on RBS. At one stage we only had one person that was shared between Barclays and RBS."

Thanks to Alice and this great post

If we use ecology as a model, the world of finance is the ecosystem. First thing you look for are the keystone parts of the system, maybe a food source or an insect and animal. Then you look for the apex predator.

Its very well known in this true science as opposed to financial modelling and Economics that removing or changing one of these two things (keystone and Apex) you can fundamentally alter the ecosystem maybe even kill it. Generally chaos reigns.

With this in mind historians of the future might well put the whole Crash down to one thing, and it might look like this

In May 1997, in the UK a major hub in the global financial ecosystem, a new government took the apex predator out of the eco system. They replaced a Wolf (BoE) with a sheep (FSA) disaster followed

I am not saying there would not have been a recession, winter must follow summer, and sometimes you get wet summers and mild winters. But this crash is over and above anything else.

The more I look at this the more I am coming to the conclusion that the FSA did not just fuck up the UK system, but also buggered the whole world. The removal of the Bank of England's regulatory powers over banks. Powers developed over many centuries through trial and error as the worlds first central bank, not perfect, no animal is, but an financial Apex predator if ever there was one.

One animal might live its entire life in one part of the ecosystem but its effects will especially if its a keystone or apex predator run through the whole system.

This of course fits into the timeline as the Eastern savings glut was beginning to show up and as the dotcom bubble was inflating. *And I cant for the life of me see any data to suggest that there was any problems in the UK system prior to this date.

No comments: