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Paul Gambles

Recognized as a regional financial expert, Paul is a regular speaker at industry events on market forecasting, financial planning, investing and legal issues for foreigners living or doing business in Asia.  Besides Paul’s blog, Paul previously distributed his ‘almost-daily’ email – “Daily Updates”, where he gave his views on timely issues affecting financial markets, macro economics, micro economics and everything in-between.

Born in South Yorkshire, England, Paul graduated from the University of Warwick with an Honours degree in English and European Studies.  He began his financial career in the early 1980s as a technical inspector at HMIT with Inland Revenue.  Following a successful career change to the Bank of Scotland in 1987, Paul moved to Bangkok in 1994 to help set-up an investment counseling practice, which today is known as MBMG International.

www.mbmg-international.com

  

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25 August 2010

Lord of Finance

One lesson from reading ‘Lord of Finance is that danger can lurk in the unlikeliest places-very much in line with our current themes of ‘expect the unexpected’ and the era of ‘Bob and Jack’. 

ARNOLD TOYNBEE, IN his magisterial review of the year's events on behalf of the Royal Institute of International Affairs would later compare the events of the summer of 1931 to the summer of 1914. Both began with relatively minor events far from the hub of the world that nevertheless set in train a cascade that plunged out of all control and brought down an entire world order. In 1914, it was the assassination of the Austrian heir presumptive, the archduke Franz Ferdinand, at Sarajevo. In 1931, it was the failure of the Credit Anstalt, the oldest and largest bank in Austria. 
 

On Friday, May 8, the Credit Anstalt, based in Vienna and founded in 1855 by the Rothschilds, with total assets of $250 million and 50 percent of the Austrian bank deposits, informed the government that it had been forced to book a loss of $20 million in its 1930 accounts, wiping out most of its equity. Not only was it Austria's biggest bank, it was the most reputable-its board, presided over by Baron Louis de Rothschild of the Vienna branch of the family, included representatives of the Bank of England, the Guaranty Trust Company of New York, and M. M. Warburg and Co. of Hamburg. After a frantic weekend of secret meetings, the government made the problem public on Monday, May Il, at the same time announcing a rescue package of $15 million, which it would borrow through the BIS. 
         

Austria was a small country, about a tenth the size of Germany, with a population of fewer than seven million and a GDP of $1.5 billion. Nevertheless, the news burst like a bombshell upon the City of London and the Bank of England
         

It’s reported that Harry Siepmann, one of the Bank of England governor's principal senior advisers, knowing something of the scope of the tangled mess that lay behind the headlines, announced, "This, I think, is it, and it may well bring down the whole house of cards in which we have been living."      
           

This time the devastating blow from the periphery is as likely to be Greek, Spanish, Portuguese or Irish as it is Austrian but actually Italy could be the most likely source.