The opinion of Valéry Giscard d'Estaing. I get the impression of being less isolated. Last year I pointed out that the financial crisis had, despite the problems and difficulties it raised, a positive aspect to it: shattering a perverse way of managing the financial markets and putting an end to unacceptable behaviour. Every time there is news about staggering losses experienced by a given financial institution or about the way equally massive profits were obtained, we have to ask ourselves about the unethical and unacceptable situation previously, given the scale of today's difficulties. We can also question the sincerity of some of the current disastrous forecasts: don't some of the financial powers have a tendency to exaggerate risk in order to convince the central banks and political authorities to provide them with bigger bale outs?
I was wondering about this when I came across a recent interview by Valéry Giscard d'Estaing: “The financial and banking crisis…raises questions about developments in the banking system over the past 20 years or so. These developments consisted of setting up another function alongside the strictly banking function (the aim of which is to finance investment, production and trade): setting up a purely speculative casino, where the players use high stakes, earn commissions and pocket unacceptable bonuses and profits. This casino has collapsed. It was based on two factors: a) lack of transparency and use of sophisticated techniques, which prevented investors assessing the value of their returns; b) the belief in the continuous increase in assets, particularly in the property market, which allowed for an escape from the system, without too much risk. This system has collapsed…We won't be seeing it again and other parts of the gravy train will go to the wall too”. Other commentaries that go in the same direction are even more scathing but their political origin calls for a degree of caution and I deliberately quoted one of the fathers of the Euro, who is not known to be a dangerous revolutionary.
A few observations. Every day brings more proof of the perversity of the system that was in place, based on speculation and with no relationship to the production of goods, research, discoveries and technical progress or know-how. The calamitous losses experienced by different financial institutions are, in the majority of cases, the result of a failed speculative venture, in the wake of all the different ventures that succeeded in the past. There certainly have been some small savers that have been hit in the fall-out of these financial machinations, but a certain prudence is required in this context too. Demanding interest above the rate of 15% already seems like usury, and it is healthy that such harmful practices are reduced. On the other hand, it is unimaginable that US consumption, which outstrips the US business rate, can continue to be financed indefinitely by other countries accumulating in dollars: a clean-up was unavoidable and must be accepted even if it leads to a temporary slowdown in European exports. We can also see that the banks, whose business activity remains concentrated in the traditional banking areas of activity, have not had too rough a ride in the crisis.
Oil prices. One particularly unhealthy aspect remains: the purely speculative mechanism for setting oil prices. This is determined by artificial operations that are not based on production or real demand but on fictitious long term purchases, in which the actors neither possess the product nor the capital for the purchase. According to the specialist press, certain operators are already involved in long term operations on $200 a barrel prices; if this proves to be true, when the set deadline is met, there will be either another hike in oil prices or mass bankruptcies. This is inadmissible.
Never lose sight of the goal. These general remarks could help to better understand the meaning and the stakes at play in ongoing negotiations in the EU and in the bigger international bodies about the different aspects of financial market regulation. These negotiations focus on a large number of specific aspects: transparency, watch-dog mechanisms, bale outs of financial bodies in difficulty, control of sovereign wealth funds, re-appearance of the “golden share” idea. The negotiations are complex and the interests at play colossal, but we should never lose sight of the final goal - the definitive eradication of a perverse system for managing the financial markets. If this is achieved, the final result of the current crisis, which was unavoidable, could prove to be positive for everyone overall.
(F.R.)