A Different Drummer

Two excellent looks at the US financial craziness from two of the smartest guys in the room at The National. The economics editor Wayne Arnold:

What is perhaps most important is not the way that Lehman’s collapse is likely to affect America and its financial system. That will be truly breathtaking, but what is likely to prove more significant is how widely it affects investors and institutions elsewhere around the world, particularly dollar-linked economies like those herein the Gulf and in Europe, whose banks and economy are already looking poised to suffer the same drop whose consequences the US is now suffering (It isn’t the fall. It’s the sudden stop)....

Ultimately, Lehman’s failure will help hasten an end to the financial crisis, in the same way that a house burning down helps stop the fire that consumed it.

And the business editor Bill Spindle:

Among the highest priority of the cabal of investment banking chieftains who met over the weekend is to set up a system to prevent those securities, and the complex contractual agreements based upon them, from flooding on to the market at once. They agreed to set up a joint fund to that would take on Lehman’s troubled portfolio and unwind its positions slowly and spent much of the weekend in unprecedented sessions revealing trading positions with each other and attempting to puzzle out ways to pair and counteract them to lessen the confusion Lehman’s failure may cause.

Read them both.

The biggest thing for me is the way this effects confidence in what we used to call knowledge and expertise. A big assumption behind these investment banks was they that were filled to the rafters with quantitative geniuses who worked 110 hour weeks grinding away on the details; hence the crazy salaries and bonuses, and the huge profits.

The world's collective resources geniuses didn't pick the approaching spike in food prices until it hit the third world on the head. Nobody seems to understand what the right price should be for a barrel of oil. And the world's pre-eminent intelligence and military machine failed so flamingly in Iraq. Our understanding of how the world works feels extra fallible right now.

All we have left is the Large Hadron Collider. If that thing fails us, all hope is lost.