Bear goes on rampage in fairy-land

"You’re making it all sound far more simple than it actually is.” That’s what someone, who works in a bank, told me at a party, late on Friday evening, following some thoughts I had on the $ 700 billion bail-out. She was a legal advisor to this big bank, you see, and I thought, “Now hold on a moment, here’s a lady who might actually know what is going on out there in finance land.” I’ve asked loads of people who work in banks, or the financial sector, or who seem to be cleverer than me when it comes to the money markets, to try and tell me what has caused this problem. I always get a different answer.

Its something to do with buying debt. (People actually buy debt?). Or its something to do with toxic assets (People invest in assets that include the word toxic?). Or its something to do with a bank that used to be a building society that goes by the name of, check this out, Fanny and Freddie (Incredible but true). Or its something to do with buying too many derivatives. (What are they again?). I am, as you understand, still mightily confused about what all the fuss is about. I thought it had something simple to do with reckless bank managers, under pressure from the top, lending too much money to those who would never be able to pay it back.

As far as I can tell there is some sinister phantom force out there referred to as “the markets” that seem to be sending the shivers down the spine of every global banker from New York to Tokyo from Beijing to Frankfurt. At the time of the last great recession Franklin Roosevelt said so famously, “We have nothing to fear but fear itself” – but then you have George W. Bush II, looking into the camera like a frightened rabbit and you wonder what lessons have been learned.
“Well, we’re not overly worried,” G. quipped in “we owe the bank “loadsa” money and have no savings what to speak of so if the banks go belly-up does that mean we can keep our monthly payments?” Its no wonder the lady-banker thought we were simple idiots but there was a sense of schadenfreude in seeing a banker squirm.

Yeah, OK, I know I’m just a simple dumb blond who can’t get her pretty little head around all these important issues but I can’t help thinking that if the banks had behaved a bit more like dumb blonds and kept their affairs simple then none of this would have happened in the first place. No one, as far as I can gather, is able to get to the bottom of this, because the whole financial sector has been given free reign to create a vast set of rules, counter-rules, over-riding-rules, and new rules that are about as impossible to unravel as the Gordian knot. Derivates, short-term selling, bonds, futures, credit bonuses, share options, going public etc. It’s the beauty of the “free market” apparently. Markets, The Economist and some extreme Republicans would have us believe, are pure as the driven snow. I can't help wondering though whether bankers and markets wouldn't be getting their knickers in a twist if they hadn't got their Derivatives into such a twist.

In fact I even took time out last week to read The Economist because I thought now here is a weekly rag that will undoubtedly inform me about what is going on. The Economist said: “There is no faulting Europeans for consistency when it comes to distrusting financiers, liking businesses that make things you can touch and looking to regulators to keep markets in good moral order.”
There you have it. “Europeans” are simple. Just like me. A dumb blond who likes “to touch” something to believe it. Not like the clever guys in The Economist who can understand nebulous, abstract markets that one can “sense” rather than “touch”.

Have any of you played Pokémon cards with an eight, nine or ten year old boy? Well let me tell you I have and I can’t get to the bottom of that either. The rules of the game are about as absurd and unfathomable as the financial market. They keep changing depending on the intuition of the ten year old kid.

There can, therefore, be but one conclusion: only ten year old boys are truly capable of understanding the rules of Pokémon and only the select few who work in finance are truly capable of understanding the little “risk” games that they have been allowed to dream up over the past ten years. If you happen not to be a part of the financial cabal then you are just too dumb to understand.

One thing I am sure of though is that were I in a position to decide on this $ 700 billion bail-out I too would say an emphatic. “NO”. I mean really. The United States’ Treasury Secretary getting down on one knee to literally beg for a blank check makes me thing that this is more theatrical farce than serious money matters. Were my kids to do that to me I would smell a rat. The way I, dumb blond, see it is: a whole loada money is going to be given back to the very people who lost the whole loada money in the first place. Would you give money back to them? Are they, err, reliable?

If G. and I don’t meet our monthly payments, regardless of whether our bank topples over the abyss or not, someone, somewhere will come and collect the money. No bail out for us home-owners. Only financial ruin. Complete and utter.

“Didn’t you get given some shares in the Halifax some years ago Dad when they went public,” I asked him last week when Lehman Brothers crumbled under the weight of its absurd “risk” taking.

“Oh yes,” he replied. “I got given some shares. It was worth around £ 1000 at some point. I gather its only worth around £ 200 at the moment.”

“Aww shucks that sucks.” I replied.

“Not really,” he answered “Its all fairy money anyway.”