Chapter 36 AN ENDLESS PARTY
t was a decade since Britons first discovered they could celebrate Christmas
every weekend and enjoy a summer holidays every couple of months. Under
Tony Blair and New Labour it had been one endless party. House prices
climbed daily with every homeowner becoming richer. To encourage them to
spend their new found wealth, ready cash was popped through their letter boxes
every morning in the form of gift coupons and ‘no questions asked’ credit cards. At
the bottom of the scale even the unemployed were bombarded with offers of easy
credit for holidays, flat screen TVs, home computers and electronic gadgetry.
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Smiling Tony’s feel good ‘I’m with you’ and his wave of encouragement became
a permanent feature of society, part of normal everyday life. You wanted
something, you went out and bought it. The only formality was a quick signature at
the bottom of the credit application form, which was rarely if ever refused.
The dotcom bust, or even 911, had little impact on the roller coaster of
consumerism. The tragic drama of 911 was transformed into a mega reality show,
culminating in a big budget remake of Bush the Father’s ‘Desert Storm’ featuring
an Anglo-American coalition routing Saddam’s army in the mother of all full
colour widescreen blockbusting spectaculars.
The second Texan led triumph was celebrated with a wild feast of consumerism,
arranged on easy terms by Wall Street hucksters, catered for by China’s cornucopia
spewing forth an abundance of mostly shoddy goods to satisfy the craving of an
insatiable Western society, consumers who had ditched old fashioned good sense
in favour of instant gratification.
It was a defining moment in capitalism, a bloodless revolution. Western
consumers had become dissociated from production, a phenomena most visible in
career choices of the younger generation, a society where few wanted to waste
their time becoming engineers, designers, production managers, foremen or skilled
workers. Instead they fixed their ambitions on banking, international marketing,
sales and distribution to make a career. But to finance, market, sell or distribute
what? Goods manufactured in China.
A Gulf Stream of cash flowed from West to East, a wave of speculative capital, in
the belief that the West was finished, a stampede, ignoring the long term
implications of nurturing the Chinese giant. Even the sudden collapse of Lehman
Brothers, the brutal end of a wild party and the dawning of a new and less happy
age, did not stop the flight.
The day after, when the party goers had slouched home, governments and
taxpayers woke up with a huge hangover and a gargantuan tab. Leaders were in a
state of shock and their unbridled easy money policies in tatters. They ran headless
from one summit meeting to another, seeking to avoid the oncoming disaster, one
of apocalyptic proportions.
Tom Barton realized he was witnessing one of those once-in-a-lifetime events as
over the course of a few short weeks the world’s stock markets lurched towards
total collapse, with banks and financial institutions facing the spectre of
insolvency. It was not unlike the collapse of the World Trade Center in slow
motion, as with each instant the unthinkable was transformed into reality. Each day
brought its load of bad news. The scale of events provoked by the collapse of
Lehman Brothers was comparable to the collapse of the Soviet Union in the last
hours of 1991. The plight of the West’s economy resembled the devastation of
Iraqi army when Colin Powell’s forces annihilated Saddam’s military on the road
to Baghdad.
A glance at Britain said everything, the once great manufacturing nation had
opted for a post industrial economy where banking and financial services
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dominated, those ambitions now lay in tatters. The glittering success of the City of
London crumbled under an onslaught of deadly blows. Those blows described by
Warren Buffet as weapons of mass destruction; complex financial instruments,
which turned on their masters, ripping the fabric of British banking into shreds,
leaving the proud nation on the verge of ruin, up to its neck in an ocean debt that
would take a generation to expunge.
The level of Britain’s national debt had reached such a scale that the thought of a
bailout by the IMF was no longer the kind of idle conjecture made by men like
George Soros. Eighteen months into the slump people were asking where it would
lead…another Great Depression. It was too early to say. But it was clear that the
world’s economy was facing the most sinister challenge since the end of WWII,
where the kind of headline grabbing phrases bandied about by world leaders
posturing before the television cameras could change absolutely nothing.
Once, when nations were struck by calamity, courageous men left home in search
of gold and new continents, colonies were built, wars were fought and new markets
created. At the dawn of the third millennium the only continents that remained to
be discovered lay beyond the earth. Colonies had become synonymous with
oppression, and wars like those of Iraq and Afghanistan were destined to end in
tragedy.
Perhaps salvation would be found as it had been in the 19th century by
inventions, made by engineers and with science’s new discoveries. In the
meantime governments trembled as the crisis approached its paroxysm. Leaders’
feared civil strife and the media reported contingency plans to cope with rioting
strikers with rumours governments had put their armies on standby. Fears of things
to come intensified when television viewers saw riot police called in to protect
India’s largest discount supermarket chain following a violent wave of looting
when it ran out of cash to pay its security staff.
There was little to do but wait. The idea that time would heal was of little help to
those who had lost their homes or jobs. As the months passed politicians pointed to
a few green shoots, which appeared in the form of statistics. They were of little
comfort to the unemployed, only jobs mattered, wages and survival. Job loss was
synonymous with financial disaster and the loss of homes. Doomsters forecast UK
unemployment reaching three million. The pain was deep and for many their only
resource was the meagre benefits handed out by a now impoverished state.
The stock market rebound was as ephemeral as the morning mist and as the
weeks and months slipped by the green shoots looked more like drought stunted
weeds. Deflation cast its furtive shadow across the nation as inflation fell to a fifty
year low with the announcement of pay cuts and wage freezes. Confidence in the
pound plunged as the country haemorrhaged its wealth.
The collective madness of bankers had resulted in unwilling British taxpayers
owning a large part of the country’s banking system and, indirectly, some fifty
percent of all mortgages. The first domino to fall had been the Northern Rock,
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followed by HBOS, RBS and finally Lloyds Bank. After the collapse of HBOS
shares, the result of a massive assault by hedge fund speculators, Lloyds was force
fed, by a desperate government, with HBOS, with it seemed little thought as to the
consequences.
Who would finance the staggering debts of the British government? Who would
buy Britain’s treasury bonds? Politicians were running out of solutions as the tide
of bad news from finance and industry reached flood level. The UK was not alone;
governments from Washington to Tokyo, from Frankfurt to Beijing, and from
Moscow to Dubai found themselves confronted with the same dilemma.
As the City burnt Gordon Brown fiddled with quantitive easing; the printing of
money in undisguised terms. The financial boom had been built on an endless
supply of cheap money, unbridled speculation, deception and cupidity, leaving the
British and American governments staring into the chasm. Their only solution was
to shovel out vast quantities of even more cheap money, most of which simply
flowed out, unhindered, into foreign markets.
The Middle Kingdom had become the recipient of the greatest transfer of wealth
in all human history. America’s richest men, with little consideration for the future
of their fellow citizens, place their bets on China. Their money financed direct and
indirect investment. They financed manufacturing, outsourcing, purchasing,
services or the transfer of know-how and technology, the export and import of
every conceivable product, and, in doing so, to the detriment of America and more
broadly speaking the West, they enriched China.
The combined wealth of America’s very rich exceeded one quarter of China’s
total GDP. Their power was beyond description, financing, whilst American
workers went without jobs, the gleaming steel and glass skyscrapers that sprung up
like mushrooms in obscure towns and cities across China, in what was, certainly,
the greatest construction boom ever seen in history.
That wealth, both earned and speculative, also financed the construction of a vast
infrastructure system. Towns and cities were linked in a vast web of highways,
high speed train systems and airline hubs, built on a never before imagined scale.
Huge sea ports appeared from nowhere along China’s seaboard. Tens of millions
of peasant workers flooded into the country’s burgeoning cities, and in the frenzy
of new wealth every ordinary Chinese citizen capable of mustering a little capital
speculated in property and stocks.
