Early summer brought more disturbing news; UK unemployment had shot up to well over two million and would certainly rise even further as jobs in Britain’s manufacturing sector fell to the lowest recorded level in modern times.
After its flirt with Wall Street’s toxic products, London’s Square Mile was licking its wounds, to many it looked as if its bankers had been mauled by an enraged bear. Wisecracking analysts quipped that those politicians who saw green shoots were on magic mushrooms: hallucinating and colour blind. Any normal person could see the few shoots that had appeared on the parched landscape were yellow and stunted.
The City seizing at straws rallied to the idea that the supposed green shoots were a sign that the crisis was on the wane as politicians tried to persuade voters that a return to normality was imminent. There was even a rumour making the rounds that bonuses would soon be back in fashion.
‘Look at it this way,’ Kennedy told Fitzwilliams, ‘this kind of crisis happens every sixty years or so and since it’s almost behind us now we’ve got the rest of our lives to make money.’
‘You’re a cynical bastard Pat, and not only that you’re living in a world of make-believe!’
‘Well memories fade fast,’ he replied, the remark bouncing off his thick skin. ‘In a couple of years or so we’ll be thinking of the hard times as one of those once in a lifetime dramas and telling people how we survived it.’
‘I suppose so, but don’t end up like Madoff.’
‘Don’t worry about that. Them out there,’ he said pointing at the City that lay below the glass dome, ‘are like goldfish, once around our bowl and everything looks new.’
They both laughed heartily.
‘Of course, with Hiltermann’s difficulty there’s nothing to stop us from taking full control of the Dutch side of the bank,’ said Kennedy wiping the tears from his eyes.
The Hollander was in serious trouble. A scandal had broken sullying the name of his old and very conservative family with the story broke of his infatuation with a Russian girl of doubtful reputation.
‘On top of being cynical you’re also an evil bastard, I mean he’s your friend.’
‘Was.’
‘That doesn’t sound good coming from a good Catholic Irishman like you.’
‘Render the profits unto us and unto God the people’s prayers.’
Fitzwilliams was beginning to feel more optimistic, at least as far as the fortunes of the Irish Netherlands Bank were concerned. The blame for what had gone wrong at the continental end could be firmly laid at Hiltermann’s door with the rumours of his womanizing. Things were picking up; the worse seemed to be behind them. Their East Asia Fund had pulled them out of the fire and with a little luck the bank would break even.
A glance at his PC would have told him they were far from being out of the woods. In standby mode the machine was automatically logged onto the ‘usdebtclock’, a sober reminder of how a nation’s, or any institution’s affairs, should not be managed. Almost two years had passed since the link had been installed, two years during which the bank had struggled to claw its way out of the sub-prime bog only to face the Irish debt storm.
The experience had transformed Fitzwilliams, he was tougher, and in some ways colder, certainly more realistic. He had not always been so objective. He, like so many other of his profession, had surfed the wild credit boom, a boom that would haunt many countries for decades to come.
On the positive side he was feeling reassured, if things turned sour, they would be bailed out either by the Irish, the British or the Dutch taxpayer. It had been proved that the economy could not function without the banks. A government guarantee was not merely an insurance policy, it was a very real competitive advantage. In addition, the legislation that had been promised to control banks now looked stillborn, the Chancellor defending the financial sector as being a vital asset to the nation.
As business slowly started to pick up, there was even talk of IPOs and companies were issuing shares to the public for the first time since the crisis had broken. It was a positive sign that investment banking was still alive and kicking after their terrible ordeal.
Despite the banker’s cautious optimism most of the Irish Netherlands Bank revenue generators remained in the doldrums, whether they were in retail or in investment banking. Fortunately, their leading investment funds had come out of the fray relatively lightly. As for commercial property, Fitzwilliams agreed with his friend Sergei Tarasov: the moment was ripe to buy prime property, when the market was down.
It was time to look east where there were positive signs. The East Asia Fund run by their Dutch arm was beginning to looking interesting. It was time to wrest that from Hiltermann’s control. The future lay in Asia as Beijing gave implicit approval to its banks for almost limitless lending. The Chinese government was effectively subsidizing the import raw materials and the export of manufacture goods.
As an investment banker Fitzwilliams knew that prospects in East Asia were not without risk. But there was a vast difference between China and Europe, or more precisely the UK. The Chinese held trillions of dollars in reserves whilst the UK was floundering in a sea of debt.
It was true the Shanghai Stock Exchange was beginning to look like a casino again. Its composite index was up seventy percent in space of just six months. Was there another bubble in the making? Only time would tell, in the meantime there was money to be made. It was China’s century. The Middle Kingdom had already overtaken Japan to become the world’s second largest economy and there was nothing on the horizon that about stop it.
If Fitzwilliams had been more objective, he would have seen what had happened to the one trillion dollar stimulus the Chinese government had injected into its economy in response to the global crisis. Much of that money had been ploughed into property and infrastructure. Rumours of sixty million vacant apartments and empty cities abounded. In Beijing fifty percent of new apartments were said to lay vacant, an echo of Spain’s property crash.
Was China following the same path its neighbour and competitor had taken two decades previously? In the late eighties Japan Inc., according to the Wall Street pundits of the time, had been set to dominate the world. When Fitzwilliams lived in Boston, Michael Crichton’s novel ‘Rising Sun’ had topped best-seller lists, characterizing visions of the financial world at that time. Japan’s star had since faded, burdened by its aging population it had squandered its vast surpluses, and above all by sustaining its zombie banks.
Many dangers stalked the world’s most populous nation. If growth stalled and environmental shock coupled with drought hit China, tens of millions of poor refugees would be forced into the coastal cities, conflicting with the first generation born of Deng Xiaoping’s 1979 one child policy. A spoilt generation, without brothers, sisters or cousins; unused to sharing, used to the comforts of their parents recently found abundance.
The Chinese government paid lip service to things like climate change and global warming. Even Fitzwilliams had his doubts about the dire predictions of the doomsters. The Manhattan Declaration, signed by a group of five hundred eminent scientists, put the changes down to natural events. The real problems affecting humanity were hunger, disease and poverty. However, poverty and the rest, he reasoned, was not his problem, as Pat Kennedy had rightly pointed out.
China was far from completing its transformation. Cities like Beijing and Shanghai would be duplicated across the vast country where three hundred manufacturing plants were opened every day. China was the world’s factory and would continue to be so in the foreseeable future.
Chapter 28 A WHIFF OF REVOLUTION