Turning Point by John Francis Kinsella
High Streets up and down the UK and Ireland were beginning to resemble ghost towns, boarded-up shop fronts were replacing not only small independent shops but stores with household names such as Barratts and Woolworths, and of course local estate agents. As many as ten percent of high street businesses had already closed down.
Those problems were far from Liam Clancy’s thought as he fumbled to switch off his alarm; it was seven in the morning. It was not as if it was that early, but with his late night pubbing and clubbing it was not unusual for his neighbours to see him stumble from a Dublin taxi before his luxury home in the wee hours of the morning. Depending on whether or not he had left his car in the city the evening before, he drove into town in his Porsche or took a taxi; the idea of taking a bus was not at all good for the image of a successful young trader.
That morning was different, he was stone cold sober and with reason, it was to be his last day at the brokerage firm, part of the Irish Netherlands Bank group. As he drove into town he wondered what lay before him. What would happen to his contractual bonus? Would he have some kind of payoff or would it simply be a blunt mail on the firm’s intranet telling him to leave the premises.
For the last five years he had lived the life of a legendary golden boy, a master of the universe — on a Dublin scale that is — building up what he now knew were risky trades, without the least thought given to the possibility of future losses. His bosses had not been interested in talking about the risks, not whilst there was fantastic money to be made.
In any case it was not Clancy’s job to sort out management problems, trading was complex, and it was for others to figure out how they should protect the bank. He like the others in the team was there to make money for the bank and money for himself.
If a trade was particularly complex it was the job of his bosses to explain the risks to the board, who in any case understood little about the arcane workings of derivatives and the like. The few who did, did so in simple terms: bets on commodity futures such as copper, or intangibles like exchange rates and bonds.
Often Clancy himself failed to grasp the real nature of the trades he contracted, but they were pushed through because those directly above him knew they would influence year end bonuses. It was equally difficult for top management to refuse their approval for certain deals when the pressure from the board and shareholders for increased profits was paramount.
Even when the controllers knew the long term risks were great they were unable to blow the whistle for fear of being called wimps. Finally it was the euphoric state of the market that decided and in any case, whatever else happened, prices rose and bonuses were paid and that was all that mattered.
Money poured in, there was no end to it and why should there be, countries like Russia were bulging with money made from oil. Wall Street and the City of London were making more money than ever. Property prices were proof that people were getting richer and richer, as for the voices of the contrarians they were systematically rubbished or pushed onto the back pages of the press as doomsters.
The bank’s top management had little real idea as to whether its trading activities were really making money or not. Of course extraordinary growth figures were reported and paper profits were huge, but the speed of events and the complexity of financial instruments surpassed them. What mattered was profits were reported, whether they were mere paper or not did not matter, the bonuses were real, and in the euphoria of the boom no one asked the question as to what would happen if and when the music stopped.
Clancy asked few questions; at least those that would have made people wonder whether he was in his right mind. He knew which side of his bread was buttered. It was the job of risk managers and analysts and their valuation systems to ask questions, but their reports were so complex that managers relying on their own intuition filed them away as completed due diligence.
Clancy was not alone in worrying about his job, across the Western world the growing unemployment situation was beginning to worsen putting an effective brake on growth and revenue forecasts. After a year into the crisis the effects had not yet been felt, it took time for people to eat into their savings and feel the bite of hardship. To make matters worse many were now threatened by repossession and many more were slipping into negative equity as forecasters calculated that unemployment would jump to nine or ten percent within a year.
The French President Nicolas Sarkozy said: We cannot have a system of rentiers and social dumping under globalisation. Either we have justice or we will have violence. It is a chimera to think that this crisis is just a footnote and that we can carry on as before.
Signs that the financial crisis was transforming itself into a sovereign debt crisis were beginning to appear as with each passing week more and more troubles piled up. Governments were forced into nationalizing banks in one form or another and were creating mass of virtual money to shore up distressed economies.
In the deepening crisis warnings went unheeded and fat cat leftist urban elites, such as the lucky sinecurists at the state owned BBC, continued to pay themselves bonuses or have their contributions to their huge pension funds boosted from public or quasi public funds. Even judges had had their pension fund contributions doubled in just five years. Ordinary workers and taxpayers had become mere serfs in the exclusive baronies of politicians and bankers.
Two decades of economic prosperity had seen the most nauseating form of social evolution take place, during which Britain became dominated by a privileged elite; fawned upon by the media with its self-appointed gurus and sycophants, a new race of princes, cheered on by the great British public fobbed off with a modern form of bread and games: unlimited credit, reality television and football, as autocratic few went about stuffing their pockets with the profits of banks, businesses, and the funds of state owned and political structures. In fact anybody holding power of almost any kind came to believe it was his privilege to help himself from the till, private or public.
The Celtic Tiger
Those problems were far from Liam Clancy’s thought as he fumbled to switch off his alarm; it was seven in the morning. It was not as if it was that early, but with his late night pubbing and clubbing it was not unusual for his neighbours to see him stumble from a Dublin taxi before his luxury home in the wee hours of the morning. Depending on whether or not he had left his car in the city the evening before, he drove into town in his Porsche or took a taxi; the idea of taking a bus was not at all good for the image of a successful young trader.
That morning was different, he was stone cold sober and with reason, it was to be his last day at the brokerage firm, part of the Irish Netherlands Bank group. As he drove into town he wondered what lay before him. What would happen to his contractual bonus? Would he have some kind of payoff or would it simply be a blunt mail on the firm’s intranet telling him to leave the premises.
For the last five years he had lived the life of a legendary golden boy, a master of the universe — on a Dublin scale that is — building up what he now knew were risky trades, without the least thought given to the possibility of future losses. His bosses had not been interested in talking about the risks, not whilst there was fantastic money to be made.
In any case it was not Clancy’s job to sort out management problems, trading was complex, and it was for others to figure out how they should protect the bank. He like the others in the team was there to make money for the bank and money for himself.
If a trade was particularly complex it was the job of his bosses to explain the risks to the board, who in any case understood little about the arcane workings of derivatives and the like. The few who did, did so in simple terms: bets on commodity futures such as copper, or intangibles like exchange rates and bonds.
Often Clancy himself failed to grasp the real nature of the trades he contracted, but they were pushed through because those directly above him knew they would influence year end bonuses. It was equally difficult for top management to refuse their approval for certain deals when the pressure from the board and shareholders for increased profits was paramount.
Even when the controllers knew the long term risks were great they were unable to blow the whistle for fear of being called wimps. Finally it was the euphoric state of the market that decided and in any case, whatever else happened, prices rose and bonuses were paid and that was all that mattered.
Money poured in, there was no end to it and why should there be, countries like Russia were bulging with money made from oil. Wall Street and the City of London were making more money than ever. Property prices were proof that people were getting richer and richer, as for the voices of the contrarians they were systematically rubbished or pushed onto the back pages of the press as doomsters.
The bank’s top management had little real idea as to whether its trading activities were really making money or not. Of course extraordinary growth figures were reported and paper profits were huge, but the speed of events and the complexity of financial instruments surpassed them. What mattered was profits were reported, whether they were mere paper or not did not matter, the bonuses were real, and in the euphoria of the boom no one asked the question as to what would happen if and when the music stopped.
Clancy asked few questions; at least those that would have made people wonder whether he was in his right mind. He knew which side of his bread was buttered. It was the job of risk managers and analysts and their valuation systems to ask questions, but their reports were so complex that managers relying on their own intuition filed them away as completed due diligence.
Clancy was not alone in worrying about his job, across the Western world the growing unemployment situation was beginning to worsen putting an effective brake on growth and revenue forecasts. After a year into the crisis the effects had not yet been felt, it took time for people to eat into their savings and feel the bite of hardship. To make matters worse many were now threatened by repossession and many more were slipping into negative equity as forecasters calculated that unemployment would jump to nine or ten percent within a year.
The French President Nicolas Sarkozy said: We cannot have a system of rentiers and social dumping under globalisation. Either we have justice or we will have violence. It is a chimera to think that this crisis is just a footnote and that we can carry on as before.
Signs that the financial crisis was transforming itself into a sovereign debt crisis were beginning to appear as with each passing week more and more troubles piled up. Governments were forced into nationalizing banks in one form or another and were creating mass of virtual money to shore up distressed economies.
In the deepening crisis warnings went unheeded and fat cat leftist urban elites, such as the lucky sinecurists at the state owned BBC, continued to pay themselves bonuses or have their contributions to their huge pension funds boosted from public or quasi public funds. Even judges had had their pension fund contributions doubled in just five years. Ordinary workers and taxpayers had become mere serfs in the exclusive baronies of politicians and bankers.
Two decades of economic prosperity had seen the most nauseating form of social evolution take place, during which Britain became dominated by a privileged elite; fawned upon by the media with its self-appointed gurus and sycophants, a new race of princes, cheered on by the great British public fobbed off with a modern form of bread and games: unlimited credit, reality television and football, as autocratic few went about stuffing their pockets with the profits of banks, businesses, and the funds of state owned and political structures. In fact anybody holding power of almost any kind came to believe it was his privilege to help himself from the till, private or public.
The Celtic Tiger