Devil Take the Hindmost by Edward Chancellor (23:54)
Forgive me this self-indulgent video. A little too much of my personal story. But when Mervyn King of the Bank of England publicly says “This is the most serious financial crisis we have seen at least since the 1930s, if not ever” – then maybe a little introspection on a long weekend is OK.
Devil Take the Hindmost charts the history of debt-driven bubbles
History is so badly taught at school. It’s dull and dry, all about dates and battles – instead of about the introduction of new ideas, waves and movements. The present can only be understood when put in the context of the past.
Mark Twain was too much of a dandy with his poetic “History doesn’t repeat itself, but it does rhyme”.
George Santayana was more on the money with his “Those who cannot remember the past are condemned to repeat it”.
I might put it more bluntly: “We f***ed it up last time and we’re about to f*** it up all over again”.
Edward Chancellor’s book “Devil Take the Hindmost – A History of Financial Speculation” describes 400 years of manias, panics and depressions – from Tulip Mania in 1637 to LTCM in 1998. A common theme of all these manias was the use of excessive leverage and the build up of debt. The resulting depressions were the periods necessary to cleanse the financial system of the debt and restore balance sheets.
Edward Chancellor wrote the book in 1999 and now works on asset allocation for GMO, Jeremy Grantham’s investment management firm. Probably a receptive environment for him. Here you’ll find some of his recent thoughts on the Sovereign Debt Crisis.
Steve Keen talks about debt bubbles and deleveraging
Steve Keen on Debt Bubbles & Deleveraging (25:16)
Steve Keen, an Australian economist, is the world thought leader on incorporating debt into economic theory, modelling how debt bubbles burst and the resulting deleveraging process. In this recent interview he talks about how the politicians have not grasped the problem and are just trying to get back to the status quo.
What we saw in 2008 was only Act 1 and we have much more pain to go through. In Why the GFC Is Not Behind Us, Steve Keen thinks:
“The need for deleveraging has not been removed … the scale of that potential deleveraging appears certain to exceed that experienced in the Great Depression.”
What the bursting debt bubble means for me
Debt is the problem – and until that is fixed, sustained economic growth is not possible. We will lurch from one economic crisis to another – GFC here, Euro-zone collapse there, G20 meeting here, Merkel/Sarkozy meeting there. And as sure a night follows day, the politicians will raise taxes and cut services – they have to, they’ve run out of money.
And so if that is the background for the next 10 years, I need to adjust. Pay down debt, own assets outright, be self-employed and not rely on the benevolence of an employer, have valuable skills, look after my own pension and health, have a shorter term outlook for investments and keep my liquid funds in the strongest currency possible.
Who’d have thought we’d be discussing sovereign debt default by first world countries on prime time television. Hmm. Would the guys currently in charge please step aside – we don’t need your “help” any more.
