The credit crunch still bites and a whiff of panic pervades the financial air. Is it the smell of decay or a temporary interlude in the onward march of the capital system? I take the latter view. There is great concern about the state of the U.S. housing market and there are worries that bank assets in the form of CDO’s and other securitised assets are not yet fully equilibrated. But, there are just too many people with a political interest in spreading gloom and doom. In the United States the frantic battle between the democrats is not conducive to rational debate about the global economy. There is no edge in saying that everything is fine and that the Western economies are in good health. In the UK, the Tories and Lib Deans are just as keen to rubbish Gordon Brown’s economic credentials and in so doing paint a picture of imminent financial collapse.
Now, I am not saying that George and Gordon do not deserve rubbishing. But, we have to be careful when planting the teeth in the proffered jugular to remember that there may be unintended consequences. It is not impossible that Northern Rock might well have survived if the opposition had not been quite so willing to grab every minute of airtime to air their patent lack of financial knowledge.
An ex-student of mine, a citizen of Hong Kong, emailed me recently to ask my view as to whether panic was an appropriate reaction to the news. Apparently there are other Western banks which are just on the brink of collapse. All I say is ‘don’t panic Colonel Mannering.... they haven’t landed get!’ (With apologies to Dad’s Army).