I really like how Bloomberg puts together this story on a financial consultant warning the end is nigh from the margins of Davos, while at the same time, the self-congratulation of The Men Who Rule the World nears bubble levels after a two-year blip of quasi-introspection.
Or as Bloomberg puts it in its inimitable way:
Loneliest Man in Davos Foresees 2015 Bank Crisis While Global Elites Party
Christine Harper juxtaposes the Barrie Wilkinson’s key complaint:
“The fundamentals haven’t been addressed at all”
With the in-the-bubble triumphalism of Davos Man:
“The systemic reforms that have been accomplished are significant,” Canadian Finance Minister Jim Flaherty said as he left a private meeting with finance company chief executive officers on Jan. 29.
And she shows how, even at Davos, a social hierarchy is enforced:
In the caste system of the World Economic Forum’s annual event in the Swiss ski resort, Wilkinson was at a bottom rung, with an identification badge that denied him access to most sessions and soirees. His message clashed with the optimistic tone of many at the center of the meeting, who were eager to emphasize the progress made after two years of hand-wringing in the wake of the 2008 financial crisis.
Here’s Wilkinson’s best case. This focuses the mind:
After the 2008 crisis, governments and central banks spent unprecedented amounts of taxpayer money to bail out the financial system. Part of Wilkinson’s concern is that if the system is allowed to return to its old boom-bust habits, debt- strapped governments may not be able to handle the fallout of another crisis, either financially or politically.
“If there is another banking crisis, the Western governments are just in no shape to stabilize the system, they’ve expended their entire arsenal on the last round of fiscal injections,” Wilkinson said.
In other words: If the banks get in trouble in the next decade or so, we’re toast.
But Wilkinson’s point about tougher banking regulation sending risk-seeking into the shadow banking system seems somewhat overdone. The bank regulation isn’t exactly punitive.
Still, his point is that the shadow-banking system is still almost entirely unregulated, despite being a major cause, and perhaps the major cause of the financial crisis.
Good for Bloomberg for seeking out and giving a platform to a guy saying things the powers that be don’t want to hear.