"With hindsight, this Golden Decade and its aftermath has all the hallmarks of, in
Charles Kindleberger’s words, Manias, Panics and Crashes. Enthusiasm about return
gave way to hubris and a collective blind eye was turned to the resulting risk. This
was a latter-day version of the Hans Christian Andersen fairy-tale, “The Emperor’s
New Clothes”. In a classic collective delusion, the Emperor’s new clothes, you will
recall, were admired by all. Conferences like this one became catwalks for banks and
the authorities alike, parading their new garments through the streets in all their
finery. Risk modelling became high fashion for the pointy-heads, haute-couture for
the anoraks.
The past two years have rather changed all that. The sub-prime market has played the
role of the child in the fairytale, naively but honestly shifting everyone’s perceptions
about how threadbare the financial system had become. The madness of crowds, as
Charles Mackay so vividly put it, became visible to all. The resulting unravelling of
the Golden Decade has been little short of remarkable."
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