A bad week for freedom, and I fear more casualties still to come
CHRISTOPHER FILDES
Iwould not care to live through such a week in the markets again, but others were denied the choice. The casualty lists from the World Trade Center are still coming in and a whole generation will be scarred by grief and loss. The survivors must pick themselves up and go on, and there is no arguing with the markets' first response, which is that the balance of the world's biggest economy, and all the other economies dependent on it, has been tilted, adversely. In our own economy, the confused signals which have been signalling boom and bust at once will now sort themselves out and turn red. The central banks' response was to make money plentiful and make it cheaper. They were going by the book on damage limitation, though the Bank of England had trouble in finding the place. The damage that may count for most has been done to the markets themselves. It had almost come to seem natural for goods, services, money, capital, skills and people to move freely round the world to where they were needed, or wanted to go. Already that freedom had come up against a half-articulated resentment, expressed in the language of protest and violence. Now it has been challenged directly and with a violence never imagined. I fear that we shall see more casualties, economic, financial and human, before this is over.
Terror by night
TERROR came to the City by night: The block bounded by Bassishaw Hall, Fore Street, Aldermanbury and Basinghall Street appeared to be one solid mass of flame. St Stephen's, Coleman Street, was soon enveloped and we could see the steeple and weathercock fall.' Next day, nothing moved: 'We emerged into smoke-laden air, heavy with disaster. Mounds of sodden rubble often altered our course, we avoided lakes of mud strewn with islands of broken brick.' Amid the scenes of ruin, Montagu Norman, the Bank of England's fabulous Governor, was defiant: 'Ruin? Go to hell. We must win.' All the same, what had gone up in smoke 60 years ago was the historic City of merchants and warehouses. `Up to that night, the City had been at least as much a commercial as a financial centre,' David Kynaston, its historian, wrote. 'It was one of the less obvious ways in which Hitler's bombs ripped the heart out of the old City.' Among the bomb-sites with the static water tanks and rose-bay willow-herb, a new City and new markets in money and capital were to spring up. Lombard Street Research, having calculated that those markets grew at a compound annual rate of 6 per cent for three decades, saw no reason why they should not keep it up but that was before terror came to New York in broad daylight.
Hunt the seller
I SPENT the weekend with a cynical banker who was offering to advise the FBI. 'The man they want,' he said, 'is Osama bin Laden's futures broker.' Now his ally conspiracy theory can be heard all over the markets. Who, in the first week of September, was driving down bank shares, insurance shares, airline shares'? Who was selling to buy back more cheaply? In this way, terror could be self-financing. I am no conspiracist, preferring to explain events in terms of chance or cock-up, but it is self-evident that global markets are exposed across the world and that the technology that sustains them — most of all, instant communications — can be used against them. My banker friend looks on the bright side, observing that Al Capone went to prison, in the end, for tax evasion. He hopes to see his man arrested for insider trading.
Buy cheaper, later
DEPRESSED? Cheer yourself up with a glass of Chateau Petrus. You can buy last year's vintage and get I:2 change out of £10,000 a dozen. Your shares may be wilting but other assets seem to be immune — so far, that is. Clarets en primeur have been run up to unheard-of levels, even though Oddbins now has them in stock. Locomotive nameplates, too, fetch record prices, so my railway correspondent. I.K. Gricer, tells me. If you would rather have a Picasso, Phillips the auctioneers, who have a new rich owner, are selling modern pictures in New York next month, and have won the business by guaranteeing the proceeds. I would hope to buy cheaper, later. Stock markets, which live by anticipation, show the way to others, and their example may be followed by the costly assets, financed with borrowed money, which so many of us live in.
The party's off
THE cavernous underground ballroom of the Sheraton Washington Hotel stands empty. This month's intimate little reception for 3,000 people, hosted by the International Monetary Fund and the World Bank, is off. All those trim houses in Georgetown, let to bankers months ago at sky-high rents, now need new tenants, and the mobs who were looking forward to a few days' bottle-throwing will have to find another target. For the first time in their twinned life, the Fund and Bank have cancelled their annual meetings. These are or have been the World's Fair of money. Ministers, governors, mandarins, bankers of every description, dealmakers, bag-carriers and hangers-on would assemble every autumn like returning swallows — and for the last thirty years or so I would come with them and take in the fun of the fair.
No fun, no fair
MINISTERS orated to an audience of empty chairs or gathered in meeting-rooms to read out statements to each other, but the action was elsewhere, in the corridors and at the parties. 'Don't just stand there,' boomed Sir Patrick Sergeant to his team at Euromoney. 'Find out which of the Japanese banks are giving parties and then go to them.' At Euromoney's own parties you could count on the champagne, and a young spark on his team got a double promotion for smuggling it into Belgrade, where the Fund and Bank were meeting — it was one of their threeyearly away matches, and bathplugs were in even shorter supply. Lately I came to think that some of the fun had gone out of the fair. The competitive party-giving had turned sour, there was less to learn, and now that so much has changed in the markets I cannot believe that we shall all be back in Washington next year. Never glad confident morning or bibulous evening again.
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