I’m not sure I agree with the Pope.
“We see it now in the collapse of the great banks that money disappears, it’s nothing,” he remarked earlier this week. I’m sure he’d have been just as chilled if St. Peters Rome (completed with the money raised by selling time off purgatory to medieval peasants), had collapsed. The moral he drew was that God is more dependable than money.
But this isn’t a crisis of money, it’s a crisis of faith. 5 live’s phone-in yesterday morning included Kriss Akabusi, who reminded us what we already knew, that the word ‘confidence’ comes from the Latin for ‘with faith’. (You didn’t? Me neither)
Market Mentality
Look at the language people are using: ‘the main emotions are panic and fear’ (Times) ‘uncertainty and fear’ (George Bush) ‘panic, fear, frenzy’ (Telegraph), ‘brutal…riot…chaos’ (Wall Street Journal: bit more macho). What’s striking is that most of it is psychological language. The crisis is not quite ‘all in the mind’, but it’s close. The talk is about rebuilding confidence - without confidence the market won’t stabilise, but until the market stabilises people won’t have confidence. Oops.
If you had to compare the graph of any banking share over the last 12 months to a mental state, it would be manic depression. The manic phase: overpricing, fuelled by reckless borrowing, has turned almost overnight to a spiral down. Take HBOS: somewhere between £12 and £1.20 is (shareholders hope), the true value of the company. But it doesn’t change that quickly over 18 months.
DONT PANIC!
One thing I admire about Alastair Campbell is his openness about his depression, of which there is more in a documentary tomorrow. Our financial markets are cracking up too. Unfortunately, being in a room full of 1000 other panicking people doesn’t make it easy to stop panicking. Just as modern life is toxic to mental stability, so is the stock market.
I remember those neat little charts from economics ‘O’ level (GCSE for you young ‘uns), which made market behaviour look oh so scientific. The worshippers of the free market maintain that the market system itself is fine, but after the last few weeks, that belief seems increasingly psychotic (= loss of contact with reality). Whilst the real economy grinds slowly into recession, share prices cry ‘look at me’ as they jump from a cliff. The Gadarine swine, who hurled their demon-possessed porcine bodies into a lake from a cliff-top, are the closest biblical metaphor.
Medicating the Moneymen
So who will cast the demons out of the pigs? The challenge is at least as much a mental one as an economic one: what will trip the psychology of the markets into an upswing, or, at the very least, boring old stability? What is the seroxat for stock markets? We have the talking cures (one a day from George Bush), and a sizeable one-off financial pill, but every depressant knows that medication works -when it works at all - only when you take it regularly over the long term.
In last week’s Britblog Roundup I covered the story that Tom Harris MP, the Rail Minister, had been shown the exit door in Gordon Brown’s reshuffle.
For some reason, this morning’s newspapers are full of outcry about what UK councils are doing investing in Iceland anyway. The answer to that seems quite simple; they were seeking the best returns for the council tax payer, which is exactly what they should be doing. Remember, Iceland’s leading banks offered high rates of interest and enjoyed AAA credit ratings. Sounds fair enough to me.
