The current crash on financial markets feels very different to those of the past.
Even though the fallout for ordinary citizens from the 2008 banking crisis devastated incomes, it was not a matter of life and death in the Western democracies.
Social safety nets, and the fact that most who live in developed countries enjoy a degree of wellbeing, meant the gyrations on stock markets made people angry but didn’t kill them.
Crisis: The current crash on financial markets feels very different to those of the past
War also is remote for most of us in Britain. Deaths and maiming are in faraway places such as Afghanistan and Syria, and unless family members are directly caught in conflict it doesn’t impact on lives.
Covid-19 is different. As Boris Johnson chillingly observed, people may well ‘lose loved ones before their time’.
In such circumstances, it does seem a little second division to be worrying about pension funds, ISAs and the tourist industry.
If we have learned anything from past market events, it is that equities bounce back and the sharper the shock, the greater the rebound.
What also is different about present events is that it is not rooted in what the great North American economist John Kenneth Galbraith called ‘the bezzle’.
This is the idea that when times are good, then banks, financiers, finaglers and badly run businesses take on far too much borrowing and are quickly in difficulty when the crash comes.
Modern short sellers, the successors to dynasty-founder Joseph P Kennedy, are often the first to see what is coming.
The current crisis is the equivalent of a natural disaster, which is why the Government and the Bank of England moved rapidly and together to place a safety net under the economy.
Taking action: The current crisis is the equivalent of a natural disaster, which is why the Government and the Bank of England moved rapidly
Under their own steam, the biggest banks in the UK have promised £30billion of help for stressed companies.
This is made easier by the most significant – if not the most eye-catching – part of the Bank of England’s rescue package: the decision to release £190billion of ‘counter cyclical’ capital accumulated in the good years and held for emergencies.
It had been expected that this funding might have to be unsheathed were the UK-EU trade deal talks come to sticky end. Covid-19 altered that.
The case for creating safety mechanisms, including the use of the Government-owned British Business Bank for making up to 80 per cent guaranteed loans for small business, must be right.
So is the promise of £30,000 of free money for micro enterprises.
What would be less satisfactory is if cash needed to support hard pressed deserving enterprises in tourism and other badly affected industries ended up supporting the feckless and undeserving.
There is a view that the assistance given to commerce since the financial crisis, notably the era of super low interest rates, left in place a generation of zombie companies making poor contributions to the economy.
As part of the Johnson levelling-up, it seemed at first a good idea to save Flybe.
But even the best run carriers, such as British Airways, which is part of IAG are going to find it hard to navigate the current crisis as the cash flow seizes up and bills and wages have to be paid.
If there is to be a future economic role for Flybe routes, better then perhaps that they are bought out of administration rather than keep the whole company alive for sentimental reasons.
Many companies that are teetering – shopping centre owner Intu, cinema group Cineworld, energy companies Tullow Oil and Premier Oil and another airline, Norwegian – have been put to the sword by the bezzle.
The degree of risk taken onto balance sheets in the shape of debt is not sustainable in times of trauma.
Before the virus crisis is over – a human tragedy forecast by Microsoft founder Bill Gates five years ago – there will be many more corporate casualties.
Brutal as it is, that is how red-in-the-tooth-and-claw capitalism works.
The bigger danger of the era of low interest rates and easy money, is that it has embedded so much risk that the virus shock clogs up the global financial plumbing.
Amid all the current gloom, a small glimmer of light.
In China, where the coronavirus began, the world’s $1trillion company Apple is logging back on.
Some 42 of its stylish branded stores are lifting the shutters after a month of darkness. One hopes the first of many small mercies.
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