Hi Arthur, In the strange way that coincidences happen (pace my espousal of the "deep information field" of quantum physics!), when Steve Kurtz was over here a few days ago on holiday he recommended Peter Warburton's book, "Debt & Delusion" (Penguin, 1999). This is out of print but I managed to get a copy yesterday from a second-hand bookshop in Salisbury and I'm now half-way through it.
Peter Warburton is one of the UK's most respected financial commentators and is currently an economic advisor to Robert Fleming, a leading international investment bank. So he's no lightweight. (Also, he's tending to argue against the activities in which his employers operate!) He summarises each chapter of the book, and I follow with the last paragraph of his final summary. At his own more sophisticated level, with much more knowledge of the financial world than I have, he is saying the exactly the same that I have been writing in my last one or two FW postings on the matter of the necessity for transparency: <<<< The argument of this book is not that governments are powerless, but that their central banks have let them down. They should have been warned, long ago, of the dangers of relying on bond issuance to finance persistent government spending excesses. They should have been more circumspect about financial innovations and their potential effects on the system. They should have insisted on tighter accounting standards, reporting procedures and capital requirements for derivatives trading. They should have co-operated more readily with other financial regulators, stock exchanges and each other for the sake of financial stability. The credit and capital markets have grown too rapidly, with too little transparency and accountability. Prepare for an explosion that will rock the western financial system to its foundations. >>>> Since Warburton wrote this there has been a collapse in equity prices on the stock market. This has caused a lot of private grief of investors, and also significant pension losses by several million private pension fund holders in England (both individual investors in insurance funds and also pensioners of employer-funds have suddenly found themselves with something like 30% less than they expected). (So far! If the stock declines again, they'll lose more!) Nevertheless, the sort and size of shock that Warburton has implied has not yet happened. All is well, apparently! All the financial commentators that one reads in the press say that an economic recovery is now taking place (in the US and the UK). Well, I can't speak for Steve's view just at this moment (we didn't much talk about economics while he was over here -- our conversation was mainly about books and literature and gothic church buildings in the villages around here), but I maintain that the present "recovery" is merely a pause. There is still far too much corporate and householder debt in the western world. There is going to be a lot more anguish before this year is out in my humble opinion. And, next time there is a slide in the stock market, it might then bring down the huge mountain of debt that comprises the bulk of the international currency and derivative trading that is now going on but which, essentially, balances like an elephant on top of a mouse (the stock market). If the Central Banks and the BIS (Bank for International Settlements) don't know what's going on -- because they're frightened to look (as Warburton maintains) -- what chance have we? If there *is* a crash of the dimensions that Warburton implies, then a total reconstruction of the world's financial system will be needed. And, indeed, it's doubtful that the world economy could recover until it's done from the bottom up. Not only will the mysterious world of derivatives have to be linked transparently to the stock market, the stock market in turn will have to be linked transparently to real currencies, not the paper tokens that are capable of bouncing up and down like yo-yos according to interpretions of individual government decisions (as we will see in the next year or two when the American dollar goes into a tailspin because of the large trading deficit which cannot continue). Keith __________________________________________________________ �Writers used to write because they had something to say; now they write in order to discover if they have something to say.� John D. Barrow _________________________________________________ Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED] _________________________________________________
