The peasants' revolt

Woah! The ship just settled further in the water. Perhaps we have been sailing on a financial Titanic after all.

Justin Webb, the BBC's man in Washington called the House of Representatives' rejection of the Paulson bail out plan, a "peasants' revolt." That's just the kind of high handed remark that is inflaming public opinion.

I'm a little bit sick of economists describing the bail out plan as a "sophisticated response" as if the opinions of ordinary people should count for nothing in the financial system.

It is not just the banks that have lost trust in each other. The electorates are losing trust in the banking system. But people are not stupid. The anger has been directed at those who have played fast and lose with our banks, not the banks themselves.

No we can't afford the banks to topple like dominoes. If the financial system grounds to a halt then so does most economic activity. Businesses will struggle to get credit, more will go bust, jobs will be lost and we'll all end up planting carrots.

But will it be the end of the world as we know it? So we might not be able to buy MFI kitchens, so what? House prices will no longer dominate dinner party conversations and within the industrialised nations we might all need to get used to the idea that we are not quite as well off as we thought we were.

But wealth is relative. The definition of poverty is not a Wall Street investor down a few million dollars. It is, as it was before these past three weeks, the lives of people struggling to survive in the Eastern Congo, Darfur, Zimbabwe and other stricken parts of Africa. A failing bank means nothing to those with nothing to lose.

That sinking feeling

I’ve been wondering these last two weeks whether the collapse of Lehman Brothers was rather like the Titanic hitting an iceberg. Just as those who sailed in the ill-fated liner, the bankers and economists at the helm of our financial system thought it was unsinkable.

Even after the Lehman crash, the passengers down in steerage were told not to panic as those at the helm prepared lifeboats that they knew couldn’t help everyone. So Lehman went under and HBOS was swallowed up while AIG
was saved and the band played on.

Now all hands are at the pump while the US Treasury secretary, Hank Paulson works out a rescue package with Congress. Perhaps the Titanic analogy is too obvious and not particularly helpful. After all, the Titanic sank while the financial system is going to be saved. It is, isn’t it? But at what a cost?

Reckless lending

Just as there was a place in a Titanic lifeboat for J. Bruce Ismay, head of the White Star Line that owned the ship, whose insistence on a fast passage led to rash behaviour by an otherwise prudent captain, the US Government is now preparing to help the very bankers whose reckless lending endangered the entire capitalist system.

When the Titanic sank, many of the poorest passengers paid with their lives. In the latest financial crisis it is the taxpayers who are being asked to bail out those who feathered their own nests in ways that have brought our banking system to the brink.

We know this is unjust and so do the lawmakers. But our fortunes are so intertwined with those we have trusted to handle our savings and investments that, even in the face of their continued enrichment, underpinned, as it has been, by greed, we must dig in to our own wealth to save their undeserving necks.

Remember how all of this was triggered by the sub-prime mortgage debacle, caused by unwise lending? That didn't happen so much when lending on house buying was largely the responsibility of building societies. The concept of mutuality that underpinned the building societies meant that those societies were owned by their savers, not by investments in the hands of fickle fund managers. This is still the case with a few of them such as Nationwide. But others, like Bradford and Bingley, wanted to become banks and turned their backs on the prudence expected in handling mutual funds.

Panic for survival

Will the bail out work or is it simply rearranging the deck chairs on a sinking ship? In theory it should help a lot. The banks, after all, could be doing more to help themselves using their collective liquidity could they not? But through their own fears they are pricing their credit out of the market. It is the equivalent of the Titanic lifeboats standing to for fear they will be swamped in the panic for survival.

What we are seeing today are the unthinkable consequences for a society forged from the principles of “buy now, pay later.” We have lived for too long on the promise of future earnings.

I recall going in to a car showroom a while back. The salesman was unhappy about selling me a car for cash because his own bonus favoured selling cars on a financing deal. When credit begins to take precedence over cash there has to be something wrong.

Respect for thrift

But the banks have not respected thrift. Their undoing has been to court borrowers, no matter who they were or how sound their credit rating. Now this policy has gone in to reverse but still they are loath to welcome savings, treating savers like non-paying guests.

Even if, as now seems likely, Paulson succeeds in securing an agreement for the US administration’s proposed $700bn bail out of its ailing banks, we need to do some hard thinking about the fundamentals of the system.

The easy answer, I suspect, will be to build better lifeboats and stronger safeguards. But this will not remove the frailties of a system that relies on spending-fuelled growth and the unacceptable waste arising from profligacy. Where were the so-called “risk managers” in banking when we needed them?

Another "ism"

In the long run we may need to find another “ism,” something, perhaps, that is focused more on long term sustainability with greater sensitivity for the environment. The invisible hand of self-interest can no longer be regarded as the tide that raises all boats. That same self-interest means the tide has gone out when the banks are thirsting for liquidity.

Now I really am mixing my metaphors with banks sinking, others beached, lifeboats becalmed and the rest of us standing enthralled on the tideline watching the white water in the distance that might just be heading our way.

Great depression

And what if the rescue fails? What then? What if we’re plunged in to a recession or depression that Warren Buffet has warned could be “long and deep?” I wasn’t alive during the great depression but my father was and he couldn’t find work. It was the same all across Europe and North America. The US spent its way out of depression on grand infrastructure projects. Germany re-armed.

War should not be seen as an inevitable consequence of economic failure but war can arise from instability and, so often, conflict comes from the left field. Here we are today, worrying about Islamic fundamentalism, but what happens if the Chinese economy collapses or if Russia goes in to decline?

I’m not sure that you or I can do anything about that but we can do some things as individuals. We can live a little differently. We can save instead of spending (ignoring what our economic masters tell us we should be doing). If we can’t afford something we shouldn’t buy it. We can learn to appreciate what we have and know what it is to have enough. Life is less complicated that way.

Read my thoughts on the "economics of enough."

Things that bug me: 2. Escalator hogging

Very quickly when you live and work in London you learn to stand on the right hand side of the escalators in underground stations.

I think that Londoners must be taught such behaviour in survival classes before they can walk, it is so ingrained in their psyche.

So you always know when someone is blocking your path in the overtaking lane that they are an outsider.

Lost, confused, anxious, they are easy prey for the streetwise Londoner who sweeps them aside with a curt "excuse me." Unless, of course, the step is blocked by a thug with barn door shoulders and "love" and "hate" tattooed on each set of knuckles. In which case the otherwise confident Londoner stays schtum becoming timid and anxious himself as bolder types crowd behind him.

"Come on, move it. What's the hold up?" They don't actually say this. Commuter speak is conveyed through glances and subliminal gestures within the ant-like movement of people around the capital.

Strangely this disciplined escalator etiquette is abandoned once the underground traveller steps out of the tube and in to a department store. Department store? Relax, two abreast, let the escalator take the strain.

Nowhere is this more noticeable than in Bond Street tube station. You have just swept up the escalator two steps at a time, zapped through the barrier, and suddenly there, between you and the street is another short escalator clogged with people on both sides of the step. Significantly this is OUTSIDE the underground barrier. So all bets are off. You want to come past buddy? Foggedaboudit.

A night at the opera

Sun readers who responded to a special offer in the newspaper have been enjoying a night at the opera - Don Giovanni, the story, it says, of a "bed-hopping stud who is dragged into hell for his wicked ways."

The Sun's report of the performance left its readership in no doubt about the high spot of the show: "just before the final curtain, Sun readers were given an extra special treat close to their hearts — Don Giovanni with a topless babe in his arms."

What a good idea. How will the rest of the press respond? Can we expect the Telegraph to be offering its readers a chance to go whippet racing in Cleckheaton? Will the FT be running a special report on the Blackpool illuminations? Is the Times to feature a new Jeremy Kyle column? The possibilities are endless.

This could be the start of a revolution in toff-dominated events. Proposals for next year: fish and chips at Glyndbourne, Polo at Old Trafford, the Royal Variety Performance at a working men's club in Blackburn, croquet with John Prescott. It could happen.

Large hadron rap

CERN, the European Organisation for Nuclear Research, has just sent its first lot of proton particles around the Large Hadron Collider - a 27km track buried deep under the French and Swiss alps.

The whole project has cost about £5bn so far with numerous cost overruns and delays. But in the media and among the public we have seen hardly a breath of criticism. Contrast this with the hullabaloo surrounding the Millennium Dome that cost £789m and the London Olympics (current budget - £5.3bn).

The dome was easier to criticise since it was no more than a very large circular canopy designed to keep the rain off a not very exciting exhibition.

The Large Hadron Collider, on the other hand, is more difficult to criticise because most politicians and journalists - the people who make their livings from kicking visionaries - have not the foggiest idea about what it is trying to do, hence the expression "blinded by science."

Moreover funding for the collider has been shared among 60 nations whereas funding for London 2012 will come from British taxpayers, London ratepayers and television and advertising revenues.

Another thing: while Beijing gave us a £20bn two-week long sporting extravaganza, CERN, at a quarter of the cost, is hoping to provide an answer to one of the great mysteries of our time - what is dark matter?

I'm afraid I must line up with the ignorant politicians and journalists but I do share some of the excitement and admire the balls and tenacity of those scientists who made this happen. Extracting £5bn from 60 countries to build a giant tube shooting around things that we can't see - that's impressive.

If you haven't seen it, one of the clearest outlines of the whole project has been produced here in the Large Hadron Rap.

What all this really means is that if we feel need the need to hold our own in pub conversations from now on we shall have to learn a whole new set of words and concepts. Either that or we can continue to debate the health of Britney Spears, Amy Winehouse and Pete Docherty. Five billion pounds to get that lot out of the news for one day? It was worth every penny.

Things that bug me: 1. Airport caravels.

I dislike airports generally. But one thing I really hate is the way people crowd around luggage conveyor belts in arrivals halls.

The “caravel jostle” is so unseemly and so unnecessary. There is always a bottleneck near the flap or ramp where cases appear from the baggage handling bay.

Everyone wants their case first. Some families hunt in packs where dad and the kids stand in file by the conveyor like a blocking line in gridiron football, while mum guards the luggage trolley. You see poor elderly ladies crowded to the fringe of the throng but even these old girls can get the elbow working when they spot their case.

Then there are those who panic, who must have their cases at all costs. Pushing, grabbing, gouging, anything goes to reach the case for fear of the agonising, unthinkable, consequences of failure: “IT MIGHT GO AROUND AGAIN!!!!”

The horror. The horror. Miss your case and it might go around again creating a five-minute delay in joining the traffic jam home. No one deserves to suffer luggage abuse of such appalling proportions.

Beyond those afflicted by the infectious panic there are the “black case obsessionals.” These are people who cannot distinguish their black cases from other black cases, so they check every label, sometimes turning promising items of luggage from the conveyor thereby sending a shudder of indignation along the lines of other black case owners.

Why don’t the black case worriers wrap their cases in yellow bands? That would make identification far too easy. Besides it would carry the risk that copycat band-wrappers would follow, thus restoring the confusion.

Of course – accepting that people would never do this themselves – the airport authority could create a pick up “buffer zone” by painting a red line a few feet from the caravel. A rule would allow people to step in to the zone to pick their case. A simple concept but deliciously fallible.

You can imagine people, having spotted their case 20 yards down the conveyor entering the zone to position themselves for the pick up, in doing so blocking access to those with nearer cases. The system would quickly dissolve into luggage anarchy. Asbos would be issued. Little old ladies would be jailed for assault. Airports would recruit caravel police and armed SWAT teams. Newspaper headlines would scream: “Case Wars!” and arrival lounges would be transformed in to no go areas. Stranger things have happened.