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From the London Banker - What We Value Is What We Save In a Crisis
For a comparative of what is valued elsewhere, it is worthwhile to look at what is being saved. I received in my inbox yesterday documents outlining the efforts being taken by the Hong Kong and Chinese authorities to address the liquidity crisis in their respective jurisdictions. They are available online here (Hong Kong) and here (PRC). The contrasts with the West are striking, and humbling.
Hong Kong is swiftly introducing a scheme to guarantee credit to SMEs (small and medium enterprises) and exporters. China is introducing controls to limit bank credit to over-extended speculative sectors, accelerate rebuilding in the regions affected by the earthquake earlier this year, and promote improvements in local infrastructure, education and economic adjustment.
Holmes would have been disgusted by a married woman who grabbed her jewel-box in preference to her baby. In the same way, I am disgusted by the central banks preserving the privileges of the financial elite in preference to the jobs, incomes and businesses powering the real economy. The US and UK authorities may criticise the banks for their inaction in freeing up lending to commercial businesses constrained by the credit crunch. The Hong Kong and Chinese authorities are implementing guarantee schemes and innovating initiatives to rapidly address the problem.
As Holmes would have considered a child’s life worth more than jewels, I consider the workers and businesses in the real economy as meriting greater protection than the financial elite. It is not merely that I think the financial elite little better than criminals for their irresponsible excesses of recent years, but that I fear long term harm and political instability will come from neglecting the needs of the real economy.
Shortsightedness is a peculiar affliction of the Western economies. We cannot seem to project the consequences of our actions beyond the next quarterly report, fiscal year or - at most - election cycle. Eastern policy makers have a capacity for longer vision – and longer memory – which makes them appreciate sooner the potential consequences of bad policy. Perhaps this is a consequence of the longer term dedication required to gain political ascendancy in their less cyclical heirarchy.
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“When a woman thinks that her house is on fire, her instinct is at once to rush to the thing which she values most. It is a perfectly overpowering impulse, and I have more than once taken advantage of it. . . . A married woman grabs at her baby; an unmarried one reaches for her jewel-box.”
-- Sherlock Holmes from A Scandal in Bohemia, by Arthur Conan Doyle
When a central bank thinks its house is on fire, it too will rush to save the thing valued most. In the United States, the central bank has rushed to save the bonuses and dividends of its Wall Street clientele by hiding away the bad assets that can no longer be foisted on gullible investors. In Europe too the response of central banks has been to save the wholesale banking and securities industry rather than the consumers and businesses underlying the real economy’s longer term productive strength.-- Sherlock Holmes from A Scandal in Bohemia, by Arthur Conan Doyle
For a comparative of what is valued elsewhere, it is worthwhile to look at what is being saved. I received in my inbox yesterday documents outlining the efforts being taken by the Hong Kong and Chinese authorities to address the liquidity crisis in their respective jurisdictions. They are available online here (Hong Kong) and here (PRC). The contrasts with the West are striking, and humbling.
Hong Kong is swiftly introducing a scheme to guarantee credit to SMEs (small and medium enterprises) and exporters. China is introducing controls to limit bank credit to over-extended speculative sectors, accelerate rebuilding in the regions affected by the earthquake earlier this year, and promote improvements in local infrastructure, education and economic adjustment.
Holmes would have been disgusted by a married woman who grabbed her jewel-box in preference to her baby. In the same way, I am disgusted by the central banks preserving the privileges of the financial elite in preference to the jobs, incomes and businesses powering the real economy. The US and UK authorities may criticise the banks for their inaction in freeing up lending to commercial businesses constrained by the credit crunch. The Hong Kong and Chinese authorities are implementing guarantee schemes and innovating initiatives to rapidly address the problem.
As Holmes would have considered a child’s life worth more than jewels, I consider the workers and businesses in the real economy as meriting greater protection than the financial elite. It is not merely that I think the financial elite little better than criminals for their irresponsible excesses of recent years, but that I fear long term harm and political instability will come from neglecting the needs of the real economy.
Shortsightedness is a peculiar affliction of the Western economies. We cannot seem to project the consequences of our actions beyond the next quarterly report, fiscal year or - at most - election cycle. Eastern policy makers have a capacity for longer vision – and longer memory – which makes them appreciate sooner the potential consequences of bad policy. Perhaps this is a consequence of the longer term dedication required to gain political ascendancy in their less cyclical heirarchy.
.
.
.
.
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