Alan Peachey is a good friend of mine. He'is a former senior executive of Barclay Bank, London. He wrote the book entitled The Great Financial Disasters of Our Time.The following is our latest correspondence. Alan has given me permission to publish this on my FB and blog (deddyjacobus.blogspot.com). Hope it will benefit you.
Dear Deddy.
Thank you for your email.To answer your second question first (and please forgive me for being cynical) "The History of Financial Disasters - What can we learn" - I am afraid the answer to this question tends to be "not very much". As far as individual banks are concerned, the problem arises when those members of staff who experienced a particular disaster have retired, and a new generation of staff have come into the bank. Those who have retired will have taken their knowledge with them, and those just arrived will be trying to prove themselves in the bank and may well fall into the same trap as their predecessors who caused the losses originally.
For example, there are plenty of examples of what works well in the UK does not necessarily work well in the United States (two nations divided by a common language). Some years ago, Midland Bank in the UK brought Crocker Bank in the US, and wound up writing off some USD 760 million (chicken-feed by today's standards). More recently (in December 2002), HSBC brought Household International Inc for some USD 14 billion.Just four months later, Household paid a fine of some USD 484 million on charges that it had been tricking customers into paying higher rates of interest than it had promised.Six years later (in 2009) HSBC is now trying to sell the bank but, guess what? It has been unable to find any takers thus far!!!
As far as I can tell, Indonesia appears to be on the fringes of the financial tsunami which is travelling around the world at present. Not all countries have been affected by the banking crisis thus far, but the problem for developing countries and for those producing commodities (iron ore, copper, aluminium, etc) is that demand is falling away for finished goods as people try to hold on to the money they have left, and therefore demand for the materials required to make those goods is also falling away.The countries which have (or will) experience difficulties are those whose citizens have a high level of debt (UK for example), or which have invested heavily in eastern Europe (Austria) or which have in vested too heavily in commercial property (Germany) or which have invested too much money in speculative building projects for the private sector, and have discovered that demand has collapsed (Spain). As you well know, Japan has been in trouble for the past ten years (mainly due to a property bubble, I believe) but by and large, the rest of Asia appears to have escaped the worst of the problems. This is because banks have pursued conservative lending policies and have not encouraged their customers to over-extend themselves by borrowing too much. Traditional banking values do have their advantages!
China has USD coming out of its ears as a result of their export boom, which has now more or less dried up, but Uncle Sam is creating money at such a vast rate (just as the UK is doing) that the value of the USD is rapidly diminishing. (see attached article). As a result, it appears to be stockpiling commodities (paid for in USD) for when demand once again increases and as a hedge against USD devaluation.
I look forward to hearing from you further in due course.
With kind regards,
Alan Peachey
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