The current number 1 topic of news and conversation today is quite rightly the meltdown of the global financial markets. The effects that this is having on anyone's day to day life and future prospects are awesome. From employment prospects to housing to holidays to pensions, everyone is affected and it is nearly impossible currently to gauge whether it will be a passing pain or a fundamental restructuring of modern finances.
But should we be surprised? Not really, as even this millennium there have been enough examples of corporate sharp practice and lack of serious regulation to warn us that not all is necessarily as wonderful as we would like to believe. In May 2006 I reviewed for the Journal of the Operational Research Society an excellent book by Roy C Smith and Ingo Walter called "Governing the Modern Corporation" which went a long way to describing quite how the dot com bubble and the Enron fiasco could happen.
Contrasting with that, if one reads the Skills Assessments of various London based organisations such as the Financial Services Sector Skills Council or the London Development Agency, or even Boris Johnson (although as Mayor of London he isn't totally unbiased), one would think that financial institutions are philanthropic organisations purely out for the public good. Yet how can the lure of seven figure bonuses or higher ensure that activity is scrupulous?
It seems to me, and I hope I am wrong, as it won't be pretty, that there could be a major and serious market correction and it will hurt. It seems the public are no longer prepared to laugh off the City bonuses, the over-heated housing market is finally calming down, and we have got to a crunch point in market regulation. As long as the financial institutions could ensure that normal people's wealth increased as well as their own, and that no one got embarrassed, they were free to find ever more "creative" ways to operate, and no one dared to say no to them as they might go elsewhere.
The potential blackmail is now loosing its force, failures such as Northern Rock, Bradford and Bingley and Lehman Brothers have embarrassed Governments and politicians will need to be seen to be acting. [Quote from the 19th September 2008 edition of Private Eye "Number Crunching: $6.6 billion - losses by Lehman Brothers in 2008 up to point it went bankrupt; $8.7 billion - staff bonuses paid out by Lehman Brothers in 2006".]
And what of the little people like you and me? Forget about a comfortable retirement, your pension pot value could well fall by a quarter this year! But for those of us in our forties and younger, did we ever think we would be able to retire? Make sure you enjoy what you do - you will be doing it a long time!
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