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There is a lot of talk about whether or not it is time to abandon liquidity and start investing in the stock market, although for many, it was liquidity that abandoned them some time ago. It is true that today many companies are already trading at a good price or even at a low price. ridiculous prices as my friend Pepe (a great manager if ever there was one) told me a few days ago. Buffet and other greats already proclaim to the four winds their greed to buy good companies. There are also voices arguing over whether the famous claudication has already taken place or not.

Many have traditionally thought, and even more do so in times of crash, about entering or exiting equity markets on the basis of the Switch Mentality. We have given it this name because it only contemplates two radically different positions: On and Off. In other words, we are up to their necks in it o nwe keep you in liquidity. However, we must bear in mind that, even at these two extremes, there are those who remain liquid with small percentages in stocks that were left up there, such as a mountaineering anchor that was put in place with the intention of making progress but is waiting alone for the market to one day approach it and make it useful again as an investment. And at the other extreme, there are also those who are not only up to their necks in the stock market, but also owe mortgages or even loans they took out to take advantage of the bargains with PER's as low as 25 or 50.

Most of them, however, have a Switch Mentality that only contemplates the simplistic patrimonial strategy of in or out of the stock market. As we explained in Circumstances vs Return/Risk, Our wealth is much more than the money in the bank. Moreover, within what is cash, we must be clear about how much of it we can risk in the stock market, and be aware that this money may not only not generate income for us, but may also be lost to a large extent. All this, within the framework of a Vital Balance which is the roadmap of our life and heritage. For all these reasons, the Switch Mentality is not only simplistic, but also extremely dangerous, as it only has a chance of success if we can guess the exact moment of the market floor. And even then, depression can condemn our longed-for liquidity to a despairing market. flat for many years. Most forget that, even in a non-depressive era, the Dow Jones barely rose by 10% between 1965 and 1983.

We must therefore be aware of the need to forget simplistic strategies and of the need for a moreafé for all. Our heritage is complex and multifaceted. And our circumstances are even more so, and very changeable over time. Therefore, our stock market investment strategy must also be complex and multifaceted.

When we think of the timing When it comes to investing the part of our assets allocated to equities, we must also be clear about the extent to which we are doing so. We must be aware that investing our entire stock market buying power in a few weeks is a gamble. Without the capacity to react to a probable error, either because we are wrong at the time or in the specific assets we are buying. Even if we get the tempo We may need this room for manoeuvre due to a sudden change of scenery or a substantial change in our assets, among many other possible reasons.

I know that many of you will say that with very small assets, the amount to be invested in equities allows little room for manoeuvre. And that is reasonably true, even if, depending on personal circumstances, the percentage of total assets that are susceptible to risk is higher. But for the middle and higher heritage, the switch mentality is one of the most serious mistakes that can be made, as it has only one and only one chance of success. as mentioned above.

Obviously this mentality must be incompatible with a long-term investment that seeks value in our purchases. But it is also reckless to rush in and out of the market even for investors who rely on technical analysis, as they still have only one chance of success even if some figures are highly reliable. Mistakes and/or technical exceptions, with this mentality, can have even more serious consequences than for the investor. value.

«If you can't do the time, don't do the crime.»

Investor in Derivatives (1978-2008)

In recent days, the United States and the European Union have proposed a series of world summits on the financial crisis, which began after the US presidential elections on 4 November. The credit crisis that has hit the markets has led the United States and its European allies to seek ways of mitigating the impact on their financial systems. At first glance, it may seem that the recession that is palpable in the air will affect both sides equally, and there are even those who believe that the United States is faltering as the world’s leading power, but we are probably a long way from such a scenario…

It is true that the current crisis will have repercussions and take its toll on the country’s economy, but it is no less true that the United States has all the necessary ingredients to remain a global economic powerhouse – quite unlike the situation in Europe, where crises tend to be more painful and protracted.

Between 1973 and 1982, the United States experienced one of the most damaging periods of inflation in its history. As measured by the Consumer Price Index, prices more than doubled during that decade. In 1979 alone, inflation reached 13.3%, paralysing the economy with the phenomenon that became known as “stagflation”, which led many commentators to doubt whether the United States could compete on the world market. Jimmy Carter delivered a famous speech in which he warned of “the existence of a crisis of confidence that was affecting the very heart, soul and spirit of the national will, and which threatened to destroy the social and political fabric of the United States”. Also during that period, major Japanese multinationals bought some of the country’s most iconic buildings, and it was even thought that the United States would be unable to compete with Japan’s efficient economy. The outcome is well known to all.

One of the factors that should be of greatest concern to Europe in relation to the United States is its lower competitiveness compared with the US economy. Taking the aforementioned crisis as a starting point, the differences that currently exist can be clearly seen. Between 1983 and 1984, the unemployment rate in the United States rose to over 10%, whilst that of countries such as Germany, the United Kingdom and France exceeded 12%. From those peaks, the United States began a rapid economic recovery, with unemployment falling whilst GDP rose, whereas European countries were left severely affected and stuck at much higher levels of unemployment, even as their economies picked up.

There are two concepts – which I shall not dwell on at length – that explain the United States’ rapid recovery compared with Europe and its current competitive advantage. The first, known as Eurosclerosis, discusses the lower competitiveness of European labour markets, due to unemployment benefits, relative bargaining power over wages – which entails higher dismissal costs and higher minimum wages – and lower competitiveness in the goods and services market, which we will address in greater detail later. The second concept is the Hysteresis, which explains how, despite the fact that European markets and their institutions were more efficient during periods of strong growth such as the 1970s (and unemployment rates were lower than in the United States), following severe disruptions, these institutions proved incapable of responding to such shocks and did little to resolve the problem of unemployment, instead acting as a brake on recovery. Thus, a persistently high unemployment rate leads to a rise in long-term unemployment and a loss of skills amongst the unemployed, creating a vicious circle that is difficult to break.

In business terms, the differences between the United States and EU countries are also striking. On the one hand, if we look at the largest companies in various sectors, we can see that US firms occupy the top spot in the rankings, if not the entire podium. Companies such as Google, Johnson & Johnson, Intel, Microsoft, Apple, Oracle, Walmart, Coca-Cola, Procter & Gamble and a very long list of others are a clear example of this.

Furthermore, and even more noteworthy than the fact that it is home to the world’s largest companies, is the large number of small and medium-sized enterprises, on which job creation largely depends, and the much higher proportion of entrepreneurs compared with Europe. Ultimately, those small start-ups that survive will become the medium-sized or even large companies of the future. The well-known ‘American dream’ is not merely a cliché, but has its counterpart in real life.

Finally, although the American public education system leaves much to be desired, the major private universities provide a breeding ground for business start-ups and for training the best leaders – something that is hard for other universities around the world to match. The University of California, Harvard, MIT and Stanford, for example, are veritable meccas of scientific knowledge and technological innovation. By contrast, government control and regulation of universities by European authorities constitute an objective restriction on their freedom of action. It should also be noted that public universities in the United States receive only a portion of their funding from federal and state governments, unlike the situation in Europe. Consequently, the ongoing pursuit of both private and public funding acts as an incentive to maintain the highest standards of excellence by recruiting the best talent, regardless of their background. These individuals subsequently show their gratitude to the university that nurtured their professional development, by substantial donations which enable the school to carry out major projects and continue to attract talent from around the world: Cluster effect in its purest form.

Facebook, a recent mass phenomenon, was invented by a group of Harvard undergraduates, for example.

In short, the United States’ ability to respond to this multi-crisis we are facing suggests that it will be greater than that of Europe – unfortunately for us – and, with that in mind, we prefer to invest on the other side of the Atlantic, given that the investment opportunities are comparable.

The date and venue for the first meeting to «Refund Capitalism» have now been set: New York, in late November 2008. The intention has been to begin discussing the future of the system in the very place ‘where the problem began’, in the words of Sarkozy himself. Coinciding with the rotating presidency, he has established himself as the EU’s leading statesman, despite having to parade Barroso alongside him – a man who is merely asked to smile for the photographers and only open his mouth to read short official speeches written by the French team. In fact, Sarkozy is always accompanied in his duties as saviour of Europe by their Minister for the Economy, Lagarde, whilst Barroso carries their suitcases. And I don’t think that’s a bad thing.

At Bretton Woods (New Hampshire, 1944), the foundations of modern capitalism were laid, following a turbulent Second World War that placed the US at the forefront of the global economy. It was there that the World Bank and the IMF. The International Bank for Reconstruction and Development (IBRD), was set up on an ad hoc basis to tackle poverty and the devastation caused by the Second World War in Europe. The 1944 meeting lasted 22 days, and let us hope that the one scheduled for next month in New York will not be rushed. The participants currently include the G8 plus other selected countries such as Australia, South Korea, Saudi Arabia and the so-called BRIC nations: Brazil, India and China.

Heads should roll there in the most solemn, thorough and far-reaching sense of the word. From highly restrictive regulations to bans on financial practices and products that have been proven – or are merely suspected – to be harmful. And the individuals responsible: those at the IMF and the leaders of those countries that are failing to properly implement the emergency measures adopted to date and those to be adopted in the run-up to the summit itself. I hope, for the sake of us all, that justice will also be done to the credit rating agencies, and that at the very least the «»chemical castration' of the rating agencies that, with a sledgehammer approach, packaged NINJA (No Income, No Job or Assets) mortgages under flashy labels with lots of A’s.

Personally, I think the case of these rating agencies is the most blatant. But the most scandalous thing is that they continue to issue ratings shamelessly. Without going any further, just the day after the giant UBS Although it received a bailout from the Swiss government, its credit rating and outlook were downgraded. However, its instability had already been plain for all to see ever since the serious damaging effects of the collapse of Lehman Brothers on its balance sheets were acknowledged. As I said: Chemical castration and a short spell in Guantánamo It would not be a particularly disproportionate punishment, given that most of the prisoners held there have never caused so much harm to the US or to the global financial system like these con artists in suits.

Let’s see how these seemingly robust regulatory measures and the public and private reprimands play out. Let’s hope that Bush’s in-person attendance alone – accompanied, as he will be, by the new president’s team (expected to be a Democrat) – does not stand in the way of far-reaching reforms that are currently facing strong Republican opposition.

There is already talk of the toxicity of hedge funds and tax havens, although the only aspect of the latter that can be criticised is the lack of transparency surrounding the domiciliation of companies issuing securitisations. In other words, it is not the low or non-existent taxation in these havens that is being criticised, but rather their lack of regulation, which allows debt securitisations to be issued under the apparent – and only apparent – umbrella of solvent entities. Consequently, many large companies have issued debt through pseudo-subsidiaries based in tax havens, which, when push came to shove, they have been forced to abandon because these issuing companies had minimal or no legal ties to the multinational that had originally lent them its name and brand. For years, it was not necessary to publicly declare the absence of a firm legal link between the issuing company and the multinational that lent its name and image, as a credit event was unthinkable; but in recent months – and I fear this will remain the case for some time yet – the last one is the fool.

In view of this practice by the duty court, they should condemn the so-called ‘mother organisation’ and, of course, the de facto matrix, rather than tax havens. There is no doubt that improving the legal transparency of these countries will make it more difficult to repeat such underhand tactics. But tax havens, as their very name suggests, will always be beneficial in an environment that is often subject to excessive regulation. Provided that they cooperate in the fight against money laundering and fraudulent securitisation practices, although, as we have already said, that responsibility must be addressed within the multinational Who actually benefits from that issue, which is registered in a tax haven? Will it go ahead? I’ll have to see it to believe it, but we need to trust the politicians who are going to try to save us.

Sarkozy, Brown y Obama have the chance to go down in the history books with a stature worthy of the Great Names such as De Gaulle, Churchill o Lincoln. For those of us from the Bretton Woods era, we always had Paris to fall back on… Let’s hope that from now on we’ll always have New York to fall back on, and that Guantánamo will finally take on a global significance.

Character is the virtue of difficult times.

Charles De Gaulle (1890–1970)

The price of greatness is responsibility.

Winston Churchill (1874–1965)

Almost all of us can cope with adversity, but if you want to test a man’s mettle, give him power.
Abraham Lincoln (1809–1865)

I hope that we will soon begin to see corporate developments in what might in future be known as Sustainable Banking. In other words, newly established entities, most likely backed by traditional banks – or, shall we say, banks from the previous era. Perhaps some large corporations that have so far remained on the fringes of the financial system might also have a stake in these new Sustainable Banks, or even – why not? – some governments.

The question is how these new banks will be regulated to ensure their long-term sustainability. Not only must the institution itself be sustainable as a business, but the overall financing system (for individuals, businesses and even states) must be substantially overhauled. Sarkozy seems to be taking the reins of an EU that resembles a school playground – albeit one with frightened pupils who are more willing than ever to put their mischief on hold. The shock has been such that there is no talk of stricter regulation, but rather of The Reformation of Capitalism, and interestingly We actually published that very same concept a month ago, following the approval of the Paulson plan. At least within the EU, with Sarkozy at the helm and Brown’s support, that is the roadmap. But it now remains to be seen whether Obama shares this view or, on the contrary, whether the lobbies Americans continue to live in Disneyland and are pushing for the situation to change only as much as is absolutely necessary – in other words, more of the same until the next outbreak.

Given our current lack of knowledge about the future, we might surmise that sustainable banking needs to increase its liquidity ratio (2%) several-fold, and that we must return to the very origins of banking. Perhaps we will soon see new sustainable banks that pay interest on our deposits at official rates rather than the Euribor. And furthermore, that they do so at the not that sort of person, rather than to the Euribor plus as is currently being done.

We must bear in mind that the current situation has enabled us to place with arelative normality large sums (€25 or 50 million) under the following conditions: The two major banks, BBVA and BSCH, currently pay approximately 6.75% per annum on these large deposits, whilst second-tier but highly reputable institutions such as La Caixa, Popular, Bankinter, etc., offer rates of up to 8%. It goes without saying that third-tier institutions, such as small savings banks and banks, far exceed that 8% rate for one-year deposits of such amounts.

In fact, large sums of money are remunerated in proportion to the cost of the respective CDSs. But the most alarming thing – if indeed we still have the capacity to be alarmed by anything – is that the spread between the cost of funds paid and received no longer matters at all; that is, the difference between the bank’s asset and liability operations. No bank cares about that anymore, and they shamelessly pay interest on large deposits at rates far exceeding those on the meagre lending they actually carry out. For those who haven’t yet guessed, the reason they do this is that the spread their operations are supposed to generate no longer matters much. core business, all that matters is plugging the holes. Bail out the water in a crude and desperate manner.

That is why sustainable banking must return to its original form, where it would probably be unable to generate the huge profits of recent decades. But there is no doubt that today they would attract a flood of money even if they offered only Euribor minus 1.5% on one-year deposits. Or would anyone with half a brain really prefer to lend their money to Bancaja or CAM at 6%?

Let’s hope we get to see the new face of sustainable banking soon, because personally I’d rather not see the same old familiar faces which, even though they’ve been cleaned up and spruced up by Big Brother, are looking more haggard by the day and are becoming increasingly frightening.

Modern finance theory, whichever methods we examine, bases its analysis on the risk-return trade-off. It is a pairing which, through being repeated time and time again, we have come to regard as unique and inseparable, and upon which investment decisions are based. Any proposal offering a more attractive return than is normally achieved tends to prompt the question «but what is the risk?», without delving any deeper.

Let's throw a few drops of humour into the sea of financial tears to make the daily news more bearable for our readers. Some of you will already be familiar with it because it is an alleged recent publication of an advertisement in the US business press. It was sent to me by a good friend whose company (Husesolar), by the way, sets the tone for the evolution of the renewable energy sector towards other segments such as the Biogas. And about which we will soon publish an article.

That said, let's take a look at the announcement published in the US electronic financial press. I have taken the liberty of polishing the English translation a little. The ad in question reads as follows:

«I am a beautiful girl, wonderfully beautiful, 25 years old. I am well educated and classy. I want to marry someone who earns at least half a million dollars a year.
Are there any men among the readers of this portal who earn $500,000 or more?
Maybe the wives of those who win that can give me some advice.
I've been the girlfriend of men who make 200-250k, but I can't go above that and 250k isn't going to make me live on Central Park West.
I know a woman, from my yoga class, who married a banker and lives in Tribeca, but she is not as beautiful as me, nor is she smart.
So what did she do that I didn't? How can I get to her level?»

Rafaela S.

So much for a peculiar advertisement in a business newspaper, in the country where all this is possible. But pay attention to the response from a reader and wealthy investor:

«I read your query with great interest, thought carefully about your case and made an analysis of the situation. First of all, I am not wasting your time, as I earn more than 500,000 per year, and that said, I consider the facts as follows: Putting the roundabout aside, what you are offering, seen from the perspective of a man like the one you are looking for, is simply a lousy deal. Here are the reasons why: You provide the physical beauty and I provide the money. Clear proposal, without between the lines. However, there is a problem: For sure, its beauty will fade and one day it will end, and most likely my money will continue to grow, more and more.

So, in economic terms, you are a depreciating asset and I am a dividend-yielding asset. Not only do you suffer depreciation, but because it is progressive, it always increases! To clarify further, you are 25 years old today and you will continue to look beautiful for the next 5/10 years, but always a little bit less every year, and suddenly if you compare it with a photo of today, you will see that it will already be aged. This means that you are now ‘on the rise’, at the ideal time to be sold, but not to be bought. To use Wall Street parlance, whoever has it today must have it in a ‘trading position’, and not in a ‘buy and hold’, which is what you are offering it for? Therefore, still in commercial terms, a marriage with you (which is a ‘buy and hold’) is a marriage with you (which is a 'buy and hold'). is not a good business in the medium/long term. However, renting it can be and, in social terms, it may be a reasonable business we can ponder and pretend. I think, through certification of, how ‘shapely, classy and wonderfully beautiful’ she is, I probable future As a lessee of this ‘machine’, I want to do what is standard practice: I want to do a test drive to make the possible operation more concrete. I can schedule it.

Jack Paul Henderson Investor.

Funny advert and funny response, no doubt. But let's go a little further in our reflection: Perhaps some stock market investors and, above all, their bank managers or those of the financial institutions with which they risk their money, have been thinking for months or years that the right decision is to marry this lady. Perhaps they think that those incipient wrinkles are about to disappear and that in the long term their wives will always gain in beauty, even though they may age in the short term. And it is quite possible that in that particular case they will one day, but perhaps your client will not live long enough and will spend his last years with a very unpleasant companion.. But there are other ladies who can make us happier today, without having to wait for a long term that we may never know, and who will age as well or better. Or perhaps our managers are only interested in us staying as long as possible by repeatedly marrying and divorcing in order to get unmentionable commissions on each of our new romantic dates, with their subsequent visits to the office of the matrimonial lawyers who will avidly realise our munisvalues. Perhaps they will propose polygamy with the highest number of «polygamies".«assets»The "possible" (as much as our heritage allows), rotating our hearts several times a year, regardless of whether the beauty of our achievements is bullish or bearish.

At most, our managers will join the bandwagon of the most Machiavellian marketing by charging success fees, i.e. depending on the amount of pleasure received. To this end, they will obviously provide us with a large number of candidates, assuming health risks, sentimental risks and unbridled and lustful costs of all kinds, and they will cross their fingers that on one of these dates, one of these candidates will satisfy us enough to achieve their success fee established. They don't care if we take serious risks in the multiple failures, they will try everything to get enough pleasure to collect their success commission, theirs, of course.

What is certain is that none of our managers will be concerned about our heart, but only about our body. However, just as in a marital relationship, in our assets we need a stable long-term relationship that can more than compensate for natural ageing with a relationship of love, complicity, companionship and, in short, all the virtues of a stable partner with whom we can find happiness. Why do managers call it Love when they really mean Sex? Even the young lady and the Investor in the advertisement distinguish one from the other.

Well, sex has always been economically more profitable. But only when life smiles on us, when we are young, handsome and rich. That is to say, only in the short term, and the life of the Investor in capital letters is something else. If we follow the indications of these managers, we will surely end our investment life old, tired, sick, lonely and poor, very poor. When we talk about asset management, we must keep both concepts in mind: Love and Sex, in that order. Because if we focus only on the latter, we will have a very bad time in the medium or long term. But unfortunately, private banking and other asset managers focus exclusively on giving us a good time... or even a bad time. At the end of the day, that matters very little to the thugs.

It is easier to look good as a lover than as a husband; because it is easier to be timely and witty once in a while than every day.

Honoré de Balzac (1799-1850)

Given the current scenario of a stock market crash (or the onset of a stock market crash), many investors are wondering what the right time is to move away from liquidity and start buying value. However, a minority of us believe that, as well as considering the right timing, we must analyse where the future value, as it will not always match – far from it – the value classic.

Most analysts believe that the utilities …and essential services such as energy and food companies, etc., are the lifeline to cling to in the midst of the storm. It does indeed seem that they could be a good corporate safe haven in which to invest, bearing in mind that their prices already reflect a significant degree of panic. But perhaps we are mistaken in looking for «safe-haven assets». Perhaps we should, of course, in proportion to our Vital Balance designed for that purpose, looking to the future value of the new era that lies ahead. A value which, as at every turning point, takes on a form different from what we are used to. The million-dollar question is: where is the new «The Value Investor’s Handbook», and the answer is that, unfortunately, it has yet to be written, although various drafts – also known as blind man's buff.

The well-known cycles are part of history, and globalisation is one of the main causes of this chaos. Chaos that will lead us to a new economy where new business models – and consequently new investment opportunities – will emerge, along with new sectors, new blue-chip companies, new mid-caps, vast numbers of new small-caps, and even new and dubious penny shares that will fuel new, effervescent bull runs. And all this against the backdrop of a reimagined and unsettling form of capitalism.

We find ourselves at a crossroads, facing a dilemma: should we seek a safe haven in utilities and essential services, or should we focus on analysing a massive, globalised Seed Capital, Angel Investor or whatever we want to call it? I’d go for the latter, especially for investors who suffer from what we in our Family Office call Distressed Wealth. That they need a specific strategy for their impaired assets – a situation, moreover, shared by all new clients in recent months. This is what we already know as Distressed Wealth Strategy. All this without forgetting, of course, a careful selection of quality traditional, depending on how the markets develop in the near future.

At the risk of repeating ourselves, we must remind readers that we must always adhere strictly to the roadmap set out by the BV tailored specifically to each investor. A BV which, moreover, must be constantly reviewed in light of changes affecting the client themselves and also the global landscape, which is more volatile than ever. Gordon Gekko would have a different story to tell…

We will continue to monitor bank nationalisations very closely to see whether or not they dispel the pseudo-panic currently gripping their customers. Who would have thought that a globalised bank nationalisation involving millions of US mortgages could be the remedy to try and calm the spirits of global capitalism, under the astonished gaze of a consumerist China? If communism were to rear its head… Meanwhile, the forgotten Cold War is re-arming and Islamic terrorism lies dormant.

Under capitalism, man exploits man. Under communism, it is exactly the opposite.

John Kenneth Galbraith (1908–2006)

Echevarri It’s bounced back to me (you’ll remember this one…) the meme launched by Farnan2 regarding the possibility of a Spanish bank or savings bank going into administration and the safety of the money deposited with them.

First of all, I must say that my comments on this matter will be, above all, those responsible. And, even though this article is longer than is advisable for a blog post, I’m going to tell you in one go everything I think is relevant and whatever takes my fancy, just as I always do.

The public only takes an interest in the health of the economy when it sees significant stock market falls on the news. It seems that if the stock markets don’t fall, the crash doesn’t exist. But unfortunately, the crash has already been unfolding in the credit market since the summer of 2007. And this failure of the RF forms the foundations on which many other aspects of the economy are based, including the stock markets. As we said in The unstable chemistry of the economic molecule Half a year ago, a strangely distorted RF could not coexist for long with a buoyant RV. We were banking on a rebalancing in the form of a recovery in credit confidence, but as we noted in that article, the other possibility was that the market would stabilise in a state of mistrust, with equity losses, whilst keeping fixed income at record lows «…breaking records in a matter of time, leading to a global crisis the likes of which has never been seen…».

In recent weeks, we have been seeing falls in global stock markets, which are unfortunately fuelling widespread mistrust, raining on already flooded ground. At present, this is leading to financial panic, casting doubt on the solvency of banks and severely accelerating the deterioration of the financial system. This effect is devastating and turns a stock market crash into banking chaos – in institutions that are already mortally wounded – when these should be entirely separate phenomena. A conventional stock market crash (such as that of ’87 or even ’29) should not only have no substantial impact beyond the markets themselves, but is even cyclically healthy. But This time, the interconnections between the multiple crises are deadly.

As for the financial situation of the global banking sector, it is critical. The US banking sector is suffering beyond description, whilst the European sector holds approximately half of the existing credit sludge. It therefore seems likely that the extent of the European crisis will be at least as severe, given that its capacity to respond is more limited by the lower potential of its economies and, worse still, the fragmentation of policies further complicates the already limited room for manoeuvre available to Europeans in general.

The much-vaunted greater readiness of the Spanish banking sector to tackle this financial crisis is, to a certain extent, real but irrelevant. In other words, the problem at hand is of such magnitude that the qualitative advantage of Spanish regulations FGD It is despicable. Proof of this is that the political measures adopted at the meeting of the 27 have been to ensure for the time being €100,000 per account holder and institution – which is a far cry from the much-vaunted qualitative superiority of the now obsolete €20,000. Perhaps these measures will not be enough to restore confidence, or perhaps they will, but for the time being the Show Me the Money It is gaining ground… Time (and we) will tell. In any case, this is a measure of trust, an act of faith. After all, these guarantees will apply to all savers, regardless of whether the bank failure affects a few thousand savers or every Spaniard, as if it were a piece of chewing gum. And even if it isn’t true, it’s a clever turn of phrase, which is what it’s all about.

The root cause of the banking crisis – namely, the toxic assets that are driving banks into technical insolvency – is in the process of being resolved. A political solution, since As far as a financial solution is concerned, the towel was thrown in a long time ago. In this scenario, Spanish banks, like their European counterparts, are no longer self-sufficient. Their ability to survive on their own is virtually non-existent. It seems that bailouts will follow one another in a macabre and unpredictable sequence, and this does not depend so much on the ranking of CDS‘… but rather on the decisions of its executives, who will seek the least bad moment to fall out of an increasingly cramped and overcrowded cupboard. But there is another danger even worse than the contamination of assets itself, and for which State bailouts would be unlikely to be effective: Panic. Our panic as customers of banks and building societies. No financial institution is prepared for a mass withdrawal of funds. But this is not solely due to their current precarious situation; even in their heyday of record profits (the day before yesterday), a mass withdrawal of money would have devastated their balance sheets. And in the face of that risk, there is no possible bailout. The system operates through links as intangible as trust, and there’s no room for repairs or welding, not even botched jobs to keep things going for the time being: Either it’s there or it isn’t.

Banks no longer lend money to one another; they don’t trust each other. However, we really must do it, and we must carry on lending them ours, because if we keep it under the mattress, that’s it, we’re done for. And only if the financial system continues to function – despite its current malfunctions – can we hope that interbank confidence will return and that the flow of money will once again lubricate an engine that has been stalling for days. We can prop up the system by withdrawing our money from the bank (only the first few); or we can rely on state guarantees and hope that the wealthiest will diversify their fortunes across various accounts and/or account holders. Among the collateral damage caused by these measures, it is worth noting that this week’s plan – the result of the meeting of the 27 European leaders (which will not be the last) – does not guarantee investment funds. And that is something that was best left unmentioned, as it is likely to provoke a flight to quality which would exacerbate the stock market slump in favour of sovereign debt or, in the worst-case scenario, lead people straight to their savings and hiding places under the floorboards. But I’d rather not think about that because it would really hurt us, and it’s within our power to prevent it.

Above and beyond the toxicity of the securitisations held in the banks’ vaults; above and beyond state bail-outs, whether or not coordinated with private vulture operations; above the surprise, globally coordinated half-point cuts in multi-currency interest rates (something never seen before)… above all of this, despite everything, it is in our hands to bring about the end of the system. If we do not continue to lend our money to the banks, there is no possible salvation. Those of you who have read my work regularly will already know that I have a particular aversion to the behaviour of banks and bankers, and I shall certainly not be the one to defend them. But without banks, our society would be set back several decades in terms of prosperity and wealth creation. Unthinkable. I am convinced that The chances of such chaos occurring are minimal, but it is also true that we have never been as close to it as we are today.

If we don’t do anything reckless, there will be a future for the system, although it will be a mad future, involving a great deal of suffering. Let’s not forget that the most toxic mortgages have only just begun to surface. Over the next two, three or four years, we are likely to see the worst of it. In other words, these will be the worst years for the governments that will have to absorb the loans, which are already turning into foreclosures with no prospect of realisation, but with one aggravating factor that will make them radically different: unlike the lending institutions that sold the loans, the government or the quasi-public bodies created ad hoc, They will not be able to allow the mass repossession and eviction of their population. Perhaps social solutions will be adopted to allow tenants to remain in what were once their own mortgaged homes, in exchange for rents well below market rates. They may also have limited options to buy in the future. But what seems unthinkable is that mortgage foreclosures by public bodies should cause a social and human crisis for millions and millions of people. A genuine housing subsidy in the truest ‘popular’ style (that of the Chinese Communist Party, not the PP).

Ultimately, we are faced with a very, very socialist scenario – some might even call it communist. There is no doubt that seeing the most ultra-liberal state on the planet – which for years has denied its citizens even decent social healthcare provision – nationalising existing housing and subsidising it is somewhat surreal. This will result in a form of nationalisation and state intervention that is as unintended as it is effective – and I would go so far as to say that, in many respects, it is fair. Unintentionally fair, and we’ve ended up here in the worst possible way.

I have been writing for months that we are facing a multi-crisis on an unprecedented scale. Despite this, I have always maintained a relatively optimistic tone, but events have taken a sudden turn. There is a ‘before’ and an ‘after’ the collapse of Lehman Brothers. A turning point in political, financial and economic terms. What we have seen since then is more than just a black swan, and so the old playbooks are proving of very little or absolutely no use. The situation is so serious that it has overshadowed the very energy crisis we were experiencing just three months ago. As for the economic and social crisis, my view is, unfortunately, very pessimistic. We are only seeing the tip of the iceberg. I fear that the worst is yet to come between 2010 and 2012, when competition amongst companies will be fierce and unemployment figures overwhelming and cruel. Being in debt at this time is, and will remain, too heavy a burden to maintain a decent household economy. The depression will be a long one – perhaps a decade spent traversing a desert where many economies – those of countries, companies and individuals – will fall by the wayside. Fortunately, most people are unaware of the gravity of the situation, but the reality is quite different: Farewell to Disneyland – farewell for many years to come. And all of this, more globalised than ever.

No state has enough money to patch up this web. The money will have to be created, and in doing so, a large part of the wealth generated by the system – perhaps virtually – over decades will be destroyed. And once this depression has been overcome, governments will probably cede the limelight to large corporations, giving rise to a New World Order that is unimaginable at present. But for that to happen, we must first try to overcome the unprecedented depression that we can only sense today.

It seems clear that the financial system is going to be saved by the mother of all bailout plans. But that doesn’t mean the mother of all crises It is going to ease off. Let no one be under any illusion: this multi-crisis has countless social side-effects that are difficult to prevent. We’ve squandered our future in the most irresponsible and absurd way. And now we have to cross the desert after having poured the water from our last canteen over our heads.

But faced with the possibility that this bailout might avert financial collapse, we find ourselves in the position of someone who knows that a family member has been in a serious accident and is fearing the worst. And when the doctor emerges from the ICU and tells us that the patient has come out of the operating theatre alive, the seriousness of their condition seems like a lesser evil compared to the thought of never seeing them again. The financial system will survive thanks to the Democratic-Republican bailout that will be approved come what may, but the patient’s prognosis remains extremely serious, reserved. I think it would be interesting to read the article again: The American Patient, which, dated December 2007, gives us a glimpse of the situation as it stood nine months ago – an eternity in this turbulent era in which we find ourselves living in such peril.

As we said at the outset, although the system will survive, the socio-economic outlook is devastating. We are set to suffer a decline in wealth and social welfare equivalent to several decades. And anyone who downplays the situation by saying that this is merely a cyclical crisis like so many others we have seen is either mistaken, deluded or lying in a politically correct manner. The locomotive that has been pulling the rest of the world along since the Second World War will no longer be able to do so in the coming years. The million-dollar question is: who is going to replace it? And we’re not talking about who is going to be the world’s leading power in the coming years, because the Chinese have no intention of ousting anyone, let alone the economic system as we know it. It is an unknown whose answer will undoubtedly shape the New World Order.

We can no longer talk about tightening our belts, but rather about a substantial change in lifestyle that hundreds or thousands of millions of people will have to make in the coming years. A dramatic yet gradual situation, in which opportunities, hidden amongst the devastation that the crisis will leave in its wake, will abound more than ever before.

I can’t help but feel strangely surprised when I reread Once upon a time… at the end of the 20th century, an article we wrote over half a year ago. A light-hearted exercise in economic fiction that is taking on an increasingly grim reality with each passing day. It has only been seven years since 9/11 (WTC), and the world is a different place. But this is only the beginning of what is yet to come. A historic, thrilling and uncertain future unlike anything we have ever seen, the result of the virtual wealth accumulated, globalisation and our own foolishness, respectively.

The Emergency Economic Stabilisation Act 2008 (EESA 2008), has become the most important and far-reaching constitution ever drafted in modern history. And it was drafted in just a few days, with round-the-clock work amidst hurried negotiations and in a situation of greater stress than the American political class – or any political class anywhere else in the world – has ever experienced. Meanwhile, the rest of the world watches in astonishment as events unfold Sunday after Sunday, unaware of the future significance of the weeks we have been living through since the intervention took place Mac & Mae. We have been saying for over a year now that history is being made, ever since, in the middle of August 2007, some of us (still only a few) woke up from the A Midsummer Night’s Credit Dream, but the drafting and subsequent adoption of the Emergency Economic Stabilisation Act 2008 It represents a genuine ‘Re-founding Charter’ for the global economic system. And it lays the foundations for a constitution for the new capitalist system. We are, in effect, reinventing the banking business and the foundations of the future credit system, and The most worrying thing is that we’re doing it under time pressure and whilst facing record levels of stress and pressure.

There were two ways of making it work and ensuring its viability:

1. That the 2008 Emergency Stabilisation Plan (I don’t know why, but I’m reluctant to call it a ‘law’), which originally consisted of just three pages, was implemented at the discretion of the Bush administration and carried over by his successor.
2. May this simple document, which gave the leaders a free hand, evolve into a much more concrete 106-page text, the implementation of which must be overseen by both the government and the opposition.

At first glance, the second option seems the more sensible choice, but it could be a double-edged sword, as partisan political interference could seriously hamper the effective implementation of the 2008 Emergency Economic Stabilisation Act.

The American political class is being put to the test in full view of the whole world. And what is most worrying is that its ability – or inability – to rise to the occasion will affect us all. Perhaps option 1 would have been more effective, albeit less democratic. It would have allowed the freedom to cover up scandals and restore confidence in the system. Something similar to what usually happens when one acts in the interests of the state, or in this case, going even further, System Reason. However, the regulatory framework for the new system – that is, the way in which financial institutions are (I hope) going to be kept on a tight leash from now on – must indeed be agreed upon by both the Congress and the Senate in order to avoid, as far as possible, favouritism, potentially corrupt decisions and the dreaded laxity.

Only as the weeks and months go by will we find out whether the 106-page document, the oversight by senators and members of Congress, and their ability to veto the use of half of those 700,000 millones from the $ programme will prove to be a positive development or not. Since initially only 250,000 will be released, with the option of a further 100,000, the government (whichever party is in power at the time) will then have to pass a renewal before Congress and the Senate before he is grant a further 350,000 million $. To save the system, it may be necessary to take too many politically incorrect decisions that will not pass the scrutiny of so many politicians who, before giving their approval, will look to their voters, fearing they might lose their future support. But this delicate process of implementing these funds requires agility, determination and a steady, surgical touch. This is something the man in the street is not equipped to deal with, and I fear that neither is a large part of the political class, which has been elected on the back of electioneering demagoguery. Politicians and political opportunists, whose quest for fame and power they may now be reluctant to jeopardise by endorsing measures that will have a direct and severe impact on their voters’ pockets.

For everyone’s sake, I hope that the American political class, for once in their lives, will live up to what is expected of them and, instead of engaging in party politics, govern for a few months in coalition with the leadership. And this must be done both by the Democrats in opposition and by the Republicans’ own internal opposition, who, to date, have been the most reluctant to support the implementation of measures that might save the system.

The path is beginning to come into view; now all that remains is for politicians to shake off their bad habits and devote themselves to Politics with a capital P, recalling the times of Plato and the Republic, but without forgetting to adapt it to our reality.

Let us hope that electoral manoeuvring and republican liberal fundamentalism do not hinder the pilots who must guide this aircraft – in which we are all on board – to the runway. It will undoubtedly be the most dramatic emergency landing in history, and one in which there may be many casualties. When we were writing Fasten your seatbelts On 14 September 2007, the aircraft’s technical problems were far less serious than they were a year later. Today, the hydraulic systems – so vital to any aircraft – have failed, and we are hurtling towards the runway in an emergency in which we must all do the right thing to survive. Because if anyone tries to exploit the situation for political gain, they will end up being elected president of the most barren region ever seen. Meanwhile, the markets continue to turn their backs on the 2008 Emergency Stabilisation Act. Something that is, in a way, trivial, because what is really at stake is far more important than the markets.

When a mob exercises authority, it is even more cruel than tyrants.

Plato (428 BC – 347 BC)