At the end of one of the most cataclysmic years in memory – certainly to my generation – it’s hard to take a squinting glance back and remember what started it all off.
The financial year began in earnest with Black Monday (another one) when, on 21 January, £77bn was wiped off the FTSE. It took traders just 21 days in 2008 to wipe off 18 months of growth. And that’s not all.
At the same time, Jerome Kerviel, the now-infamous Societe Generale trader, was frantically trying to close his position. He had bet €50bn on European shares going up. His miscalculation cost SocGen €5bn and was seen at the time to be the biggest fraud in history. It wasn’t even the biggest of the year.
Still, he was under pressure:
But Jerome was tied to that desk. One day I came back to the office at 3pm because I had forgotten my stupid little hat, and there he was, fast asleep on the photocopier.
At first I assumed he had been having sex with it, but then I remembered he’d been working for almost six hours.
On 17 February, Northern Rock became the first British Bank since the Seventies to be nationalised. After the first run on a bank for over 100 years, and after more than a few weeks of government dallying, Alistair Darling took Northern Rock into “a temporary period of public ownership”. It wouldn’t be the last bank to come cap-in-hand to the treasury.
In March, the US Federal reserve was forced to prop up the fifth largest bank on Wall Street, Bear Stearns. It was forcefully sold to JP Morgan Chase, for as little as $10 a share, way below the 52-week high of over $130.
April is the cruelest month, at least for homeowners. Just as the last decade of boom was based upon the assumption that equity would continually be created by rising property prices, so the bust would be based on this assumption failing. People (Americans if you buy Mr Brown’s explanation) then began to realise they had paid more for their mortgages than their house was worth. For the record, UK house prices are down 16 percent in the past 12 months, making it the steepest drop since 1983.
One thing that rose – at lease temporarily – in 2008 was the price of oil. On 11 July, it peaked at $147 a barrel, sending car owners, hauliers and airline operators reeling. Several holiday companies went bust, including XL, sponsor of West Ham United, leading them to play a in sponsorless shirts.
Oil has now dropped but petrol companies are still reluctant to pass this on to the pumps, as duty has now been increased in the wake of the VAT bonanza.
On 15 September Wall Street Giant filed for Chapter 11 bankruptcy protection. This was the day the global financial storm cracked its cheeks.
The significance of this event cannot be overstated. Immediate aftershocks saw other Wall Street Giants, Meryl Lynch and Morgan Stanley’s share price tumble and, for a few desperate hours, the financial world held its breath as George Bush mused: “This sucker could go down.”
If the second biggest bank on the planet could, suddenly and seemingly without warning, run out of money, then no one was safe. Not even the US economy.A $700bn dollar bailout was agreed after much political posturing in the US senate and a global financial meltdown was temporarily averted.
Not to be outdone, saviour of the world Gordon Brown had his own blank cheque for Britain’s banks. On 8 October, HM treasury agreed a £500bn scheme to ensure RBS, Barclays and HBOS didn’t go the way of Icelandic banks and half of Britian’s council accounts. As a result, you and leave 2008 with more banking shares than how we entered it.
Just to make sure we don’t feel like gaining a little light relief by jetting off somewhere nice in the New Year, on 25 November Alistair darling announced his catastrophic Pre-Budget Report. In it, he outlined that borrowing in the UK is set to soar to 57% of GDP in order to help those people struggling to repay mortgages they knew full well they couldn’t afford when they took them out.
This, coupled with successive interest rate cuts to historically low levels, has seen the value of sterling plunge against the dollar and the euro, as well as just about every world currency save the Zimbabwean dollar. I pound is now worth over a quarter less against the single currency than at the start of this year.
And so, as the world’s economies limped, tatty and exhausted out of the worst year of their lives, one joker remained in the deck. In December Bernard Madoff became history’s biggest fraudster, easily trumping Mr Kerviel and tricking banks, fund managers and charities out of $50bn dollars with an audacious ponzi scheme.
If ever there was an apt face for ‘the age of greed’, here it is.
To say 2008 was a roller coaster year would be inaccurate. It’s been more like a ravine. The financial world’s annis horribilis can’t end soon enough. But don’t hold your breath for a better 2009.
