Remembering the Crash
Where were you when the Global Financial Crisis struck? A decade later, most of us would struggle to answer that question. We are not sure when it actually started, or even what ‘it’ was. We cannot even agree a name for this most complex and shape-shifting of crises: The Credit Crunch? The Banking Crisis? The Global Financial Crisis? No wonder the ‘lessons’ are harder to draw than the 1929 Wall Street Crash. There is clearly some confusion over which part we are supposed to be remembering.
The most significant setback for Western capitalism since the Second World War lacks a single iconic news ‘peg’. Successive eruptions occurred intermittently: in Paris, Newcastle, New York, Reykjavik, London and Edinburgh. The street exodus of box-carrying bankers from Lehman Brothers in New York is perhaps the closest we get to a climactic moment, but that happened fully a year after doubts about securitised debt emerged, and it was followed by many more shocks. It hardly equals the fall of the Berlin Wall as a visual shorthand for the end of an era.
What you remember ten years later depends on how much attention you were paying. The then Chancellor Alistair Darling’s ‘uh-oh’ moment came on holiday in Mallorca as early as the summer of 2007, when as he recalled recently, ‘the economic waters [had] seemed as calm as the Mediterranean’. But reading minor reports in the Financial Times about French and German banks closing funds they were unable to value ‘made [him] stand stock still… If this was happening in Europe, the same problems must exist in London and the US’.
Mr Darling has described elsewhere the subsequent moments of truth: the endlessly-filmed queues outside Northern Rock in September 2007, the first bank failure in 150 years, and the phone call from the Chairman of RBS in October 2008 when he learned that one of the biggest banks in the world was two hours away from running out of cash. Not in his wildest nightmares would the Chancellor have guessed that the same collapse in confidence that felled the small, poorly-managed Newcastle bank Northern Rock would later destroy global titans like RBS and Lehman Brothers. This failure to join the dots was widespread and worth reflecting on this year – and next year as well.
The complexity of the crisis, or crises, makes life tough for news editors who love clear anniversaries. More importantly, it explains why so much of the public are not aware of the magnitude of what happened, or of the extremity of the cure. Whether they realise it or not, the desperate measures that helped avoid a widespread collapse gave rise to the strange world we live in ten years on, with its ultra-low interest rates, buoyant equities and massive debt levels. We should at least be remembering that we are still very far from being back to normal.
Speirs & Jeffrey
1 November 2017