Nothing much happened today…

Nothing much happened today…

15-Sep-08

Nothing much happened today – oh, apart from a Yankee blue-blooded bank that had survived the Great Depression and a couple of world wars filing for bankruptcy, and another fleeing into the arms of a competitor, and an insurance company asking for a float of $40bn. It’s all going horribly wrong.

Too many chickens and not enough roosts, about sums it up. Having spent the last decade lending each other money we didn’t have, we’re now having to pay the price. And who are we paying, you may ask? Well, those nice people in Asia and India who made things much cheaper - and indeed better – than we ever could. Wasn’t it nice of them to put up with low wages and living standards to make those things for us? More to the point, wasn’t it nice of us to give them all our custom?

If you want to establish a business, the classic approach to pricing is to start off low and move high. Once they’re hooked, you can charge what you like. To me, the past 10 or so years have been one big price promotion by the developing countries. They were doing nothing more than winning business from their rivals – us. The fact that we were also their customers just added some flavour to the pot. They did nothing wrong – we were Madame Bovary to their Lheureux, and how we loved those silk stockings from Paris…

Back to the banks. Between them, Lehman Brothers and Merrill Lynch had 252 years of mostly profitable banking behind them. How do they feel, these geniuses who ran them into the ground? – these experts who inherited all the wealth and effort and reputation of those who went before, and lost it all on an idle punt at the gambling wheel. They hardly measure up to the prudent and diligent men who created something for them to play with that had real standing and solidity.

They should feel many things today – anguish at what their employees will have to go through, regret at decisions taken and not taken, confusion at how it got to this pretty state of affairs. But most of all they should feel shame - shame at not being good enough to measure up to the long line of antecedents.

Which is something of a surprise, as whenever any of us outside the chosen few asked why they paid themselves such vast sums, they always said that it was because they all worked very hard and they were all highly expert at what they did. Now, many people work very hard, and are highly expert at what they do, but the money they get is not even in the same universe as the salaries and bonuses that these people awarded each other. Even if they had been just as expert as they claimed, for one man to earn more money in a year than most of the towns I’ve ever lived in earn in a year is just plain wrong. None of us deserves that much money just for doing a job.

Banking started off pretty simple. Somebody wanted to start something off, but didn’t have the cash. Somebody else who did have the cash, but didn’t have the idea or the inclination, gave the money to the first somebody. In return, they got a fee, and eventually got their money back. Seems fair.

But as ever with human beings, some is never enough. Little ways of doing a bit more with this spare cash kept occurring to people, so that in the end the whole thing got so damned complicated that no-one – think about this, no-one – understood what was going on. It’s taken them a whole year to still fail to work who owes what to whom. There are two cheating bastards who’ve screwed me over in the last year, and I knew exactly who owed me what every second of the year. (If you’re interested, I got one of them and the other will probably die before I get what he owes me, crooked old man that he is.)

There are two ways to go about things in this world – ‘never a borrower nor a lender be’ is one of them, which was my Granny’s favoured route. She started work when she was thirteen, and died aged eighty-six with not very much money but absolutely straight with the world, and loved by everyone around her.

The other way is more complicated – but if you choose it, you’d better keep track of what you’ve borrowed and what you’ve lent. If you don’t, you’ll end up like those haunted men who ran Lehman Brothers and Merrill Lynch into oblivion – bent as hell and hated by all.