Too Big to Fail

Watching the 2008 recession unfold was a roller-coaster affair. I was a young graduate and had little vested interest in the market oscillations other than the fate of my own companies performance. It survived of course, but it was a dark period for many outside the tech sector.

Back then, a lack of U.S. government regulation and aggressive Wall Street injection of toxic assets pre-empted the mother of all bubbles - the Great Recession. The quick reaction from US government (and particularly Tim Geithner in the Federal Reserve) brought a series of quantitative easing plans and TARP, which essentially bailed out the investment banks which were deemed “Too Big to Fail”. While Goldman, BOA and co. lived to fight another day, Lehman went under.

What’s prescient today in 2018 (a decade later), is that the EU (between policy makers in Brussels & the ECB in Frankfurt) have taken very indecisive and meandering actions that will gradually sow the seeds of division. Not only in it’s response to this recent crisis (particularly with austerity measures placed in peripheral EU states - Ireland, Spain, Greece & Portugal) but with new regulations such as MIFID2 which are impeding European retail investors from entering global financial markets.

Unfortunately today's innovative advances that are being made in Fintech & Blockchain etc. will simply remain "shiny" & "token" movements without genuine disruptive merit due to stifling bureaucracy. Such irrational behaviour and policy is not in the interests of European citizens and proof that EU policy-making is adrift. In polar opposite of the U.S. condition of “irrational exuberance”, a market phenomenon explained by Prof. Robert Schiller as one in which excessive animal spirits lead to catastrophe, it seems we Europeans are suffering from excessive “irrational intervention”. Which begs the question why we should continue to remain blindly loyal to blind leadership.

Therefore my fear is not that big banks are failing, but indeed big government. Ironically, such ill-conceived policy will only serve to weaken Europe in the long-run and improve competitiveness in breakaway states. The EU is too big to fail but doing far too little to succeed. Somehow, EU policy is no longer fit for purpose and drastically needs rebalancing.

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