10 YEARS SINCE THE FI­NAN­CIAL CRI­SIS

Ten years ago to­day saw the be­gin­ning of one of the worst fi­nan­cial calami­ties ever to hit the world’s econ­omy, hav­ing an im­pact on mil­lions of peo­ple world­wide. Mark Casci, Chris Burn and Arj Singh re­port.

Yorkshire Post - - FRONT PAGE -

WHEN THE fi­nan­cial cri­sis hit in 2008 one of the most com­mon re­ac­tions was to ques­tion why no­body had an­tic­i­pated its ar­rival.

The re­al­ity is that there were numer­ous com­men­ta­tors who had been warn­ing over the dan­gers of ex­ces­sively lever­aged banks and the vul­ner­a­bil­ity of the hous­ing mar­ket for sev­eral months prior to the crash.

How­ever in the din of a grow­ing econ­omy, their voices were drowned out.

Fast for­ward to 2018 and the cli­mate is dif­fer­ent. With a slug­gish econ­omy and numer­ous po­lit­i­cal shocks en­gulf­ing the planet, the warn­ings over an­other down­turn are grow­ing.

One of those peo­ple who has been sound­ing the alarm bell for some time is David Scott.

An in­vest­ment manager with wealth man­agers Leeds-based An­drews Gwynne, Mr Scott spent more than 25 years as a stock bro­ker.

For Mr Scott, the lessons of the 2008 crash were not learned and we are now in a sit­u­a­tion where an­other stock mar­ket cri­sis could un­fold at any time.

He is far from a lone voice, with former Prime Min­is­ter Gor­don Brown this week warn­ing that the world econ­omy was “sleepwalking” into an­other down­turn.

Else­where 18 per cent of fund man­agers at Bank of Amer­ica Mer­rill Lynch be­lieve that stocks have peaked, while David Stock­man, former bud­get di­rec­tor for the Rea­gan White House and hedge fund manager Paul Tu­dor Jones, who fa­mously called the 1987 crash ahead of time, have all ex­pressed con­cerns that an­other down­turn is around the cor­ner.

Speak­ing to The Yorkshire Post, Mr Scott said: “We are pretty sure we are about to hit an­other 2008.

“We are in the mid­dle of one of the crud­est ex­per­i­ments when it comes to money.

“The next thing is not go­ing to be a Western thing, it is likely to be a global thing, and one won­ders if it is go­ing to be used as some way to bring fairly rad­i­cal change to the money sys­tem, but it will mean a lot of pain for a lot of peo­ple.”

When asked if any lessons have been learned from the 2008 down­turn, Mr Scott is un­equiv­o­cal.

“The an­swer is no, we have con­tin­ued on in the same way.

“In Amer­ica there was a win­dow of op­por­tu­nity of maybe about six months where we could have re­ally re­formed the fi­nan­cial sys­tem. The banks had been bailed out and were on the knees. And it was com­pletely lost.

“The banks needed to be reined in, bro­ken up into smaller in­sti­tu­tions and more reg­u­la­tion.

“The world got into a mess be­cause the banks were too big and we had too much debt. In or­der to get out of this debt we made banks even big­ger and got even more debt.

“In 2008 we had a na­tional debt of about £600bn, it is £1.7 tril­lion now. Os­borne and Cameron bor­rowed more money in real terms than the Sec­ond World War cost us just to keep the things go­ing.”

In many ways Mr Scott feels that the sit­u­a­tion in 2018 could be worse than it was 10 years ago.

He has grave con­cerns over the amount of Quan­ti­ta­tive Eas­ing, the in­tro­duc­tion of new money into the econ­omy, and in par­tic­u­lar the fate of pub­lic sec­tor pen­sions.

“The main dif­fer­ence in 2008 was that they could not cut in­ter­est rates, they couldn’t flush the sys­tem with liq­uid­ity, the global fi­nan­cial sys­tem came within hours of crash­ing, cer­tainly within the UK it was al­most im­mi­nent. What they did was cre­ate money. A lot of com­men­ta­tors re­fer to QE as the heroin of the sys­tem. You pump into the sys­tem, you can’t wean it off, you have to keep giv­ing it big­ger and big­ger doses un­til the pa­tient dies.

“Churchill fa­mously said never waste a good cri­sis and in 2008 we wasted that cri­sis. In the Western world, cer­tainly in the UK, there is no way we can af­ford to pay the pen­sions that are promised.

“If you are promised some­thing you need to check the guar­an­tor.”

DAVID SCOTT: ‘The banks needed to be reined in, bro­ken up into smaller in­sti­tu­tions.’

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