meltdown by paul mason
@PaulMasonNews is Newsnight's Business Editor. He's not a wonk, an ex banker or an academic. This is his great strength. It seems to enhance his ability to convey all this mumbo jumbo to the average Joe.
Meltdown opens in mid September 2008 with the intensity and pace of an James Elroy crime thriller. Banks are beginning to die and Mason introduces a list of high rolling, low profile characters who may be connected. Men who, before 2008, were largely unknown outside a world where Wonks pour over financial reports and government papers.
Hidden banking systems are revealed, systems seemingly unknown to the banks themselves. Events happen at rate even 24 hour media coverage is failing to cope with. Each night Mason's Newsnight report becomes more panic stricken and bemused than the previous. This is the background to the opening chapters.
The unthinkable had begun to happen as bank after bank goes under. The British banking system is hours away from collapse. A phrase that sounded apocalyptic but at the same time banal. No one really had a grip on what that meant. No one had ever stopped to explain what that would actually mean because no one thought it could ever happen.
Essentially it would mean that the money in your bank account would simply disappear - pooof! Gone. Go to the hole in the wall and nothing! Quite literally nothing would come out - anywhere, everywhere. It only reappeared because the government dug into our pockets and handed it all over to the banks. That's called 'refinancing' in financial terms. I've learned loads of these phrases over the past few years.
Economist after economist appeared on TV like half-baked football pundits trying to predict the result between Barcelona and Preston North End. Each one failing miserably. The form book had gone. No one had the faintest clue what was happening or going to happen.
Someone must be to blame and Mason begins gathering the evidence and rounding up the suspects. Ben bernanke. Alan Greenspan. Hank Paulson. Fred Goodwin. These are the men who ruled the world because the government let them write the rules. The Dickensian named Bernie Madoff (pronounced "Made-off”) and Dick Fuld (pronounced "fooled"), Lehman's boss, borrowed over 40 times what his bank had on the books, ultimately leading to his staff vacating their offices, carrying their working lives in cardboard boxes.
These were the men government gave free hand to run their banks and institutions how they wished. The reasoning - they had a self interest to make their banks run efficiently, if they didn't they'd be out of a job and their banks would go bust. The only flaw was that they were allowed to feather their nests from the Golden Goose they'd been charged to look after. They didn't kill it with one blow, instead they plucked away for 25 years until all that was left was a shrivelled carcass.
During 2008 bewildering phrases began raining down like shrapnel - credit default swaps, sub primes, leveraging, quantative easing, strange techy financial lingo that has now bizarrely settled into everyday conversation. Economic Correspondents morphed into War Correspondents, predicting the fall of nations & the death of Europe usually clad in a flak jackets and helmets in front of blazing riots.
As Meltdown reaches chapter 5, it becomes clear that it's not so much an Elroy "Whodunit" more an elaborate twisting Murder on the Orient Express. Yes bankers were at fault. Yes capitalism is guilty. Big government is guilty. Globalisation is guilty. But also anyone who ever maxed out their credit card. Anyone who "leveraged" their house to buy that second house. Anyone who took the 'bribe' and voted their cosy building society into a reckless compulsive gambling bank. In some way we all lined up and stuck the knife in - we all had motive - greed.
Mason, whose politics are firmly on the left (did he really write an opera about the Miners Strike?) doles out some fierce, well deserved, well directed criticism in the final chapter. The trouble is - it's not coming from a Wonk or a Head of finance, Hedgie or Aacademic. Mason's opinion probably won't account for a hill of beans in a world where boom follows bust as night follows day. Where unchecked Capitalism bonded to unchecked human self-interest can only ever lead to one place.
The book's sub title "The End of the Age of Greed" is a statement rather than a question. Here's hoping.
I read somewhere that David Bowie was the cause of the credit crisis. Personally, I never forgave him for "Never Let Me Down", the banking crisis pales next to that turd.
I was talking to a friend about the ways to spot the next financial bubble, what are the tells…the stuff to look out for, so we can sell our houses at the height and retire in splendor. The Dame released his bonds in the late 90s, The Prudential snapped up £55 million, Moodys rated them AAA, the Napster came out a few years later and they dropped to Junk status. The thing is, there's form with this, there's a trend. Bowie might think he was the first artist to 'securitise himself' but another planted his flag/urinal there long before him.
Monte Carlo Bond
In the early 1920's, Marcel Duchamp, obsessed with mathematics, devised a system to clean the casino's in Monte Carlo, as much a publicity stunt as a serious attempt (as opposed to Bowie's blatant cash grab). So he printed 300 bonds, bearing his soaped up head with hair pulled into 2 horns. Each to the value of 500 francs and each one claiming to return 20%. It's all sounding very familiar.
They were issued on the 1st November 1924 and endorsed by the Board of Directors, Rose Selavy (Duchamp's pseudonym). He managed to find 2 investors and made off to Monte Carlo's roulette wheels with the 'investment'. He neither won nor lost, which for him was the "peak of financial success". "If one perseveres long enough one can hope to win an amount equal to the wages of a clerk who works in an office as many hours as the gambler works in the casiino." 5 years later was the wall street crash.
So I'm waiting for the Lady GaGa issue in 2020, I'll be getting on the blower to the Estate Agent and I'll have the boards up that afternoon!
Written on: July 28 2010
Filed under: finance :