THE CRASH (2)

Alan Fisher is far from reassured
by an expert forecast

Wednesday 1 October
The financial crisis continues to dominate, but it's not really about what happens now – it's about what happens next. The world's markets are waiting for politicians in the US to agree a bail-out deal for the financial sector creating stability in an industry which has had little of that in the past year. The 1929 Wall Street crash created a global depression and recovery took years. A very smart man by the name of Andrew Walter works at the LSE. He knows about these things and he tells me, 'The current crisis is not yet global because the major emerging markets, like China, India and Brazil are relatively robust at the moment. So this time it's different, but there will be a slow burn and eventually even they will be affected significantly in the next year so'. There's no growth in Europe, the US or Japan. This means they import less and that hits the emerging markets because they've fewer places to sell their products.
     It would be easy to describe what's happening as a banking problem. The reality is that banks have money they lend to companies that fuel the economy which creates the jobs. And when banks don't have money to lend because of bad investments and the money supply gets tight then companies collapse, economies suffer and jobs are cut. Put another way – we all pay the price for the bankers' mistakes which is why they are being bailed out by governments. More and more the financial markets are being warned changes are coming. Governments insist that the days of big bonuses, risky investments and companies banking big profits then pleading for help are over.
     It's hard to make the financial crisis a people story because there's no one-size-fits-all answer about how it affects each of us – only that it will. And there's no doubt that this will pass, it's just that no-one can tell us when.

Thursday 2 October
The governments behind the main European economies are already planning to host a meeting this weekend to discuss a rescue act for troubled banks. But before they even get round that table conflict and argument are evident. The French want a fund of around £230 billion pounds but the Germans are not up for issuing blank cheques to banks 'regardless of whether they behave in a responsible manner or not'. Gordon Brown is under pressure from British banks because the Irish decided to guarantee deposits for the next two years, so apparently call centres in the Republic have been inundated with calls from the UK with people looking to switch their accounts across the water. The French say the figure for the fund wasn't theirs and it came from the Dutch, who say they have no idea what the French are talking about.  I don't exactly feel bathed in the comfort that everyone knows what the heck they're doing.