Tuesday, 16 June 2009

Atonement - All That Glisters Is Not Gold

European Business Express ran this editorial two years ago, just as we were all learning to say 'sub-prime'. Get ready for a return to high oil prices and a steady climb in housing demand.

Atonement, starring Keira Knightley, opened this year’s Venice Film Festival. A galling tale of perception and deceit, it has at its core Shakespeare’s message from The Merchant of Venice, “All that glisters is not gold.” Gold has passed out of fashion, but with some analysts predicting prices of $1000 an ounce, the Gold Standard is making a return.

Shylock would have scorned Northern Rock, accused and applauded the Bank of England in suitable measure, and suffered greatly with a daughter such as Knightley’s character ‘Cecilia’, ensnared by confusion and an unrelenting tide of events.

Ms Knightley’s publicist would punch out weight-loss denials at mere mention of a pound flesh, but could do little to assuage concerns that financial markets are anorexic. Markets are currently adjusting to ongoing sub-prime turbulence, but it is a play on words.

Innovation and increasingly perfect information have conspired to encourage risk-taking. This will continue. The banking system relies no longer on strolls along elegant Venetian canals to gauge risk and weigh opportunity. In an instant, risk is calculated.

Investors seeking to avoid “moral hazard” will have taken no comfort as the United Kingdom’s Chancellor guaranteed the savings of Northern Rock customers. Politicians can no longer serve a ruling class. Economic growth depends on the perceived wealth of voters, their capacity to borrow and spend, their provision of tax revenue and electoral success.

We believe what we want to, what we need to. Economics is a confidence trick, gold is actually worth nothing. The current “crisis” is little more than an adjustment; perhaps a little painful for a time, but the markets will recover, and move on, for there is much to be gained from confusion and swimming with the unrelenting tide of events. When it comes to the economy, there is no atonement. It is a work of fiction.”

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