"Is it capitulation?" (code for "buy") has been one of the questions peppering media reports of the carnage in markets - and to ordinary people's life savings. But while many hedge funds are still subject to margin calls; and the unwinding of credit default swap insurance continues (the Lehman auction is today) being early can be a financially capital offence (free pun day).

'Capitulation' implies a linearity to markets and to the market cycle that, in actual circumstances, can only be pure guesswork. This dislocation is so massive that the case for chaos - as in a large, lengthy readjustment to a new path of equilibrium (eventually upward, hopefully) - is all but undeniable.

I would like to be able to say with conviction that having Mr Bernanke, an expert on the Great Depression, is an advantage in this situation. Obviously, in current conditions, it would seem that having a central banker with an encyclopedic knowledge of 1930s what-not-to-do policies is a Good Thing. But a constant thought lingers: if we had had someone who had learnt the lessons of the 1920s we would not require Mr Bernanke's expertise.

And with that regret each day I turn on the computer and plug into a financial crisis that is inexorably poisoning intra and international social and political relationships. There is a fallout threatening these spheres too - just as occurred in the 1930s.

Unduly alarming, perhaps. As the recession, with its partner systemic financial risk, begins to double team key global economies I hope to be a contrary indicator on this call.

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2 comments

  1. Charles Butler // 10/10/2008 01:02:00 PM

    Rawdon,

    Sentiment is currently failing to predict sentiment in its normal fashion. Similarly, Kramer's call was spot on, contrary to the theory concerning those types of pronouncements. And it is possibly the first time that Time magazine has published a disaster cover before the fact.

    Right now, there are no secrets here.

    Very nice piece, BTW.

    CB

  2. RJH Adams // 10/10/2008 02:30:00 PM

    Thanks C.

    A negative bias affecting judgement possibly. But why, apart from the base domestic political reasons, does the UK think legally pursuing 320,000 bankrupt Icelanders is a good thing?

    If that's indicative of the direction things are heading even as the sky falls...

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