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IN BUSINESS
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In Business
Thursday 8.30-9.00pm,
Sunday 9.30-10.00pm (rpt)
Programme details 
9 October 2008
Listen to this programme in full
Peter Day
In Business – LIVE

As the global financial system stares into the abyss, In Business goes live … Peter Day asks a panel of seasoned experts what happens next … and how we get out of the mess we all seem to be caught up in.
About this programme by Peter Day

This week’s In Business is devoted (like so many programmes) to the Crunch of 2008, an attempt to sift meaning from the chaos presented unto us. This is part of what I said in the World Service From Our Own Correspondent the other day:

"Why do financial crises so often break out in autumn in the northern hemisphere? September after September, or at the very least October, there’s this haunting sense of anxiety in the air : the Crash of 1929, the Crash of ‘87, the Asian Crisis of ’97, the Crunch of 2008, round about now is when these things tend to happen. Why?"

The answer must be human nature; markets are human, after all. Problems that seem to be containable in the springtime in the world’s leading financial centres fester on, unchecked, over the summer.

Then, when the holidays are over, the problems are still there: unresolved, or worse. People begin to think through the consequences, to look to the end of the year. And that is when they begin to panic.

Boom and bust is of course a familiar part of much human activity. Agriculture has known it for thousands of years: the Biblical seven fat years of prosperous harvests followed by seven lean years of famine.

Cyclical high prices lure new producers into an industry : when their production comes on stream, everyone’s prices drop and the inefficient producers are driven out of business. For generations this bubble phenomenon was particularly noticeable in the American pig market: and the hog cycle of boom and bust became an example (and a warning) for everyone else.

Financial historians point out the close historic associations between farming and finance. In the 19th century when the main industry was agriculture, interest rates in the financial markets would tend to rise every spring when farmers borrowed the money to sow their crop; in the autumn, with the harvest safely in, interest rates would tend to fall as farmers repaid their bank loans.

And long after agriculture had shrunk in total economic significance from its 19th century predominance, the economic historians could still detect the same seasonal ups and downs of interest rates.

It is at this sort of time that wise bankers turn to a memorable book published in London 167 years ago, called Extraordinary Popular Delusions and the Madness of Crowds.

In it the Scottish journalist Charles Mackay gives almost endless examples of bubble behaviour as a very familiar part of human nature indeed..from Mediaeval witch burning to 17th century Dutch tulip mania to the weird 19th century outbursts of street catchphrases in great cities.

Financial markets are particularly susceptible to these bursts of madness; and one edition of Popular Delusions carries a valuable note by the Wall Street financier Bernard Baruch, the man who said he made his fortune by “Selling too early”. He claims the book saved him millions.

He wrote this at the very bottom of the crash that began in 1929 : “Even in the general moment of gloom in which this is written, when many begin to wonder if declines will ever halt, the appropriate abracadabra may be : ‘They always did’.”

So far, Barnard Baruch has been right.
Contributors:

Keith Clarke
Chief Executive, Atkins Engineering

Jon Moulton
Founder, Alchemy Partners

Julie Meyer
Chief Executive, Ariadne Capital

Bob McKee
Chief Economist, Independent Strategy

George Cooper
Author, The Origin of Financial Crises and Fund Manager, Alignment Investors

John Kay
Economic Commentator

Useful links
 
Money Box Live Special: On a special Money Box Live on 12 October, presenter Paul Lewis will take your questions on the safety of savings during a time of financial turbulence.
About In Business

We try to make ear-grabbing programmes about the whole world of work, public and private, from vast corporations to modest volunteers.

In Business is all about change. New ways of work and new technologies are challenging most of the assumptions by which organisations have been run for the last 100 years. We try to report on ideas coming over the horizon, just before they start being talked about. We hope it is an exhilarating ride.
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