Writing as someone who witnessed the Enron saga from *ahem* very close proximity, I learned an important lesson. Well several actually, but this one is to do with how the dominos fall, and the answer is – surprisingly slowly. Enron, the pre-eminent market-maker in the global energy sector, went under in October 2001. This brought down the vast and burgeoning ‘merchant energy’ sector, and after that the project finance sector; and at the time I assumed this would happen in weeks, if not days.
Not a bit of it: the big energy merchants crashed at the rather leisurely rate of one per month, until the final bankruptcy (TXU Europe) a full year after Enron. Project finance hit its nadir the year after that.
There isn’t space here to discuss why this happens in such slow motion. The point is that what we are currently seeing on the vastly greater theatre of world finance, indeed the global economy, needn’t be anything other than protracted agony. We can expect wave upon wave of Bad News, each time emanating from some new and unexpected quarter. IMHO, we’ve only just begun.
And today’s news ? Well, B&B of course, and Mervyn King’s pronouncement, and US student loans: but also this. Fitch, the ratings agency, has analysed
Yup, we’ve only just begun. Happy Valentines !