Saturday, 30 January 2010

Why I'm with Obama

The fact that President Obama’s recent statement of intent as regards splitting out ordinary banking activities from the more speculative ‘off piste’ forays that have brought us all so much trouble caused a shock to the US stock market should be no surprise. Banks, heavily damaged though they are, remain truly enormous and still represent a very significant chunk of the Dow Jones. However, I am sure that the correction that we saw last week will be the usual short lived demonstration of annoyance and not much more.

Much more significant in the long run will be the much better than expected US GDP figures, which showed that the US economy grew by an annualised 5.7% in the last quarter of 2009.

When contrasted with our ‘narrow squeak’ of +0.1% estimated growth for the same period, we begin to see who might have been “best placed to deal with a recession”.

I’m with Obama all the way, and I am not referring to his campaign slogan of just over a year ago. I believe that it is imperative that banking practices are made more transparent for the public and investors alike if we are to be expected once more to engage with these organisations going forward. Where I differ with many is that I feel that the more experimental and innovative trading activities are also to be welcomed, just not mixed in with the same organisations whom we expect to be clearing our pay cheques every month.

I fear that the President’s honourable aims may be thwarted by the many vested interests, which would prefer that the institutions in question remain vast, monolithic structures that are beyond comprehension and control. Indeed, the pronouncement may even have been evidence of a certain degree of cynicism on Obama’s part, designed as a bargaining tool that can later be withdrawn to ease his Healthcare Bill into reality. If so, it might still have served as valuable a purpose but I would love to see it succeed.

One senses that despite what we all might have felt about him during his election campaign, there is more intent about Obama and less playing to the galleries than is the case with our incumbents. I was somewhat puzzled quite why Lord Myners, the man who approved Sir Fred Goodwin’s pension deal at RBS, despite warnings at the time that it would be “enormous”, followed Obama’s announcement quickly with a statement that he would not be pursuing the same strategy for the UK. To date I have seen no plausible rationale for this, which leaves me to suspect that it is either merely another symptom of the pre-election paralysis that stops us attending to all the other pressing economic issues or is yet more evidence of an opportunity missed as a result of key figures not being ‘up to the job’.

There were many factors that caused our present economic malaise, too many in fact to list here. We were unfortunate that a number of these happened to coincide, turning what could have been a simple correction of cycle into a vicious collapse. That we stand broken as a result is undisputed. The crippling level of unemployment, record levels of debt and a stagnating economy will all take many years to overcome.

The saddest thing of all to my mind is that we appear to be happy to let this painful time pass into history without truly learning the lessons of how we made greater the danger of this mess befalling us in the first place.

Any man who tells you he can predict the future is misguided, but the bigger fool is the one who ignores the past.

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