Quote, Unquote

Economist John Maynard Keynes once said of the business cycle that in the long run all would be well. He added waspishly, "but in the long run we are all dead."

Watching last week's unraveling of the financial system he might have a point ... but this time in the short run. $2.5 trillion has been wiped off global stock exchanges. It has been the worse week in the markets since 2008 and Lehman Brothers.

And the response from government? As another economist J K Galbraith put it, "In the US though power corrupts, the expectation of power paralyzes." Barack Obama has been characterised as being well meaning but ineffectual. Things have hardly been any better in Europe.

When it emerged Eurozone finance ministers were briefing at cross purposes about support for the Italian and Spanish bond markets, the European Central Bank said of these "undisciplined communications" that they were merely "constructive ambiguity." Worthy of Yes, Minister.

Some bright spots? The EU Commissioner for Monetary Affairs talked of a Monetary Fund to police the activities of Eurozone members. The catch is the technical work will not start until September: Gardez les vacances! The restaurant is closed 'lundi et aout'. OK, Drake played bowls whilst the Armada was at the gates but he did seem to know what he was doing.

At least Angela Merkel broke into her holiday, but what did her office say in response to the crisis? Another quote: "Markets caused the drama. Now they have to make sure to get things straight again."

Er, no. It is increasingly clear markets need tighter supervision; there is an unsupportable amount of private debt that cannot be financed without massive global economic growth; and there is an increasing need for the smack of strong government. Roosevelt's New Deal, basically Quantitative Easing although it wasn't called that in the Great Depression, used the Tennessee Valley Authority and the Interstate road building program to propel the US out of the trough.

Something as creative is now called for both from Governments, using Keynesian principles or otherwise and from the Banks themselves.

One exit quote, again from Keynes: "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." Tell that to the markets.

For more information on how LINK can help your company steer through a crisis, contact LINK Associates International by emailing info@linkassociates.com or phoning +441332222299.