The idea that SA may experience "a classical banking crisis" is not beyond the realm of possibilities. This prospect was raised by Nedbank CEO Mike Brown last week. For some people, this may not be all bad.
Discussions about SA politics are too narrowly defined between eternally right and eternally wrong. I have no desire to get involved. It suffices to say that SA is not immune to making the wrong political decisions that can set off such "a classical banking crisis".
There is certainly sufficient evidence — across time and place — to demonstrate that behind every economic, banking, financial or currency crisis one may find a terrible political decision or misguided set of beliefs.
This is as true a statement to understand the meltdown in Venezuela as it is to understand the global crisis of 2007-08, which was precipitated, in part, by former US Federal Reserve chair Alan Greenspan’s rigid and ideological beliefs in deregulation. Greenspan admitted as much.
Venezuela President Nicolás Maduro Moros has yet to emerge from the coma so brilliantly captured by Wolfgang Becker in the film Good Bye, Lenin!
A database of the IMF shows that between 1970 and 2007, there have been 124 systemic banking crises. It is safe to say, as sure as there will be tomorrow, that there will be another crisis.
Greenspan is, of course, also famous for suggesting that politics no longer mattered, because "thanks to globalisation" policy decisions have been largely replaced by "global market forces" that now govern the world. Since the 2007-08 crisis these assumptions have been revealed as largely delusional.
In SA, too, ill-conceived political decisions lurk immediately below the surface.
This is probably an understanding shared by Reserve Bank governor Lesetja Kganyago, who wrote last weekend that we should avoid "the temptation to pursue economic policies that have short-term, populist benefits but long-term costs".
Nonetheless, word on the street is that another global crisis is brewing. Everyone is encouraged to make as much money as they can, while they can. More correctly, it is the word of Davos Man — (in the most slippery of McKinsey-speak, and in the argot of JPMorgan or Morgan Stanley) delightfully described by Edward Luce of the Financial Times as "the world’s wealthiest recyclers of conventional wisdom" — which we have to worry about.
These are the people who have the most to gain from crises, many under the guise of "innovation" and entrepreneurship. For instance, in the immediate aftermath of the last financial crisis, property prices in the US became cheaper and small firms were gobbled up because of lack of capital or almost no competition for bidding.
It is worth reflecting deeper on banking crises and their social origins. We can take two views and throw them in a blender. One is a type of "where we are now" and the other is "what has happened over the past 40 to 50 years".
A database of the IMF shows that between 1970 and 2007, there have been 124 systemic banking crises. It is safe to say, as sure as there will be tomorrow, that there will be another crisis. Very many of these crises have followed debt accumulation that fuel booms (or bubbles) that may make governments look good, but expose society to larger risks. During these periods of boom, private debt accumulation is encouraged.
As it goes, the entire system is currently on life-support fed by quantitative easing, access to easy credit or zero-deposit mortgages, among others. The basic point is that the build-up of debt invariably ends badly. The last global crisis that started in the US in 2007 raised public debt in that country by 24% of GDP. The Japanese crisis of 1997 hiked debt by 42%.
Whatever the statistical size, Gillian Tett of the Financial Times writes the weeks and months before a crisis are almost always marked by "hubris, greed, opacity — and a tunnel vision among financiers that makes it impossible for them to assess risks".
We seem to be approaching extremely high levels of debt once again. From the time that the crisis first broke, in 2007, and for the next decade (until 2017) the ratio of global debt to GDP rose from 179% to 217%.
In 2017, in China alone, gross public and private debt rose to about 300% of GDP. In the US, government debt rose to 105% of GDP, and household debt hovered around 78%, not quite as high as the 98% of nine to 10 years earlier. But believe the smartest guys in the room, we may be facing another crisis.
In April 2016 Anthony Licausi, the MD of Barenberg Capital partners, began to give clients advice on "how to profit" from "the upcoming crisis". Since then, Barenberg has managed more than $2bn in transactions. As mentioned at the start of this argument, there are people who cannot let a good crisis go to waste.
• Lagardien is a former executive dean of business and economic sciences at Nelson Mandela University and has worked in the office of the chief economist of the World Bank as well as the secretariat of the National Planning Commission.
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