I might as well start with an admission: I wouldn’t recognise a collateralised debt obligation if it came up to me in the street and shook me by the hand.
So if you were to doubt my expertise when I start pontificating about financial matters, well, I’d concede that you just may have a point.
But I hope I’m not being a total simpleton if I suggest that some of the coverage of recent events risks losing a sense of proportion. Yes, I know that Alistair Darling said that current economic conditions "are arguably the worst they've been in 60 years”. And I have no doubt that’s how it feels if you’re trying to keep the ship afloat in these storm-tossed seas.
Leave aside for a moment the hysteria on the stock markets. Consider the UK unemployment rate, up sharply to 5.5 per cent, and rising more quickly than at any time since 1992. But consider also: at 1.7 million out of work, the figure is still only just over half what it was 25 years ago.
All right, what about inflation, also up sharply? True, and it’s rising at its fastest rate for 11 years – but at 4.7 per cent, it’s still far lower than in 1975, when it reached 24 per cent, or 1980, when it was at 18 per cent.
Those of you of a certain age will recall a character called Corporal Jones in the TV comedy series Dad’s Army. His catch-phrase “Don’t panic!” was guaranteed to spark exactly the opposite reaction. So I won’t do a Corporal Jones.
Nor will I pretend that the events of the past two weeks haven’t been dramatic or serious. When a major UK mortgage lender is taken over; when one of the world’s biggest insurance companies is nationalised in the US; when iconic names in the financial world like Lehman Brothers, Merrill Lynch and Morgan Stanley are bandied about like so many dodgy second-hand car dealers, even I can recognise that something is up.
But my experience of previous crises – and I don’t think anyone who lived through the recession of the early 1980s is likely to forget it – leads me to conclude that what goes down must, sooner or later, come back up again. The whole point of economic cycles, I would have thought, is that they are cyclical.
Yes, if you have a mortgage, you’ll be worried about interest rates. But doesn’t any prudent borrower factor in possible rate changes over a 25-year period? If you’re saving for a pension, you’ll be worried about the value of your pension pot. But unless you’re planning to cash it in now, there’s a fair chance it’ll claw back its previous value within the next couple of years. (After all, the stock market now, even after all the falls of recent days, is about where it was three years ago.)
Of course, jobs are being lost, businesses are suffering, and homes are being repossessed. Not for a moment am I suggesting that the current crisis doesn’t involve real hardship. And with the financial services industry playing such a significant role in the national economy, clearly a crisis in the City has important knock-on effects.
All I’m saying is that I doubt the world is about to end just yet.
Oh, and by the way, remember how oil prices were close to $150 dollars a barrel a couple of months ago? You may not have noticed, but yesterday, they were below $100. That’s a drop of one-third in eight weeks. Just thought I’d mention it.