Lehman Brothers Collapse: New Financial Architecture Required

Switching on the radio this morning, the reaction to Lehman Brothers’ bankruptcy was sobering to say the least. No more “Aww .. it’s OK, it’ll get better”. Now it was:

“It may be past time to panic already. These are certainly seismic events.” Terry Smith, Chief Executive at Tullett Prebon, leading Internet Stock Brokerage

“This is not stress testing, this could be testing where the failure point lies.” John Moulton, Alchemy Partners, leading Private Equity providers.

Time and time again there was discussion of the architecture of modern market capitalism, leading to dark predictions that other “buildings” could easily collapse before a new architecture would emerge.

All of which reminded me of the earthquake which hit China several months ago.

There, a single seismic shock flattened hundreds of schools while the buildings around them remained standing. In some towns an entire generation was almost wiped out.

No one called for an end to schools or children to avert another disaster. Instead they called for an end of corruption and a new regulatory framework to ensure future schools were built using proper materials.

Similarly, the architecture of the money markets and how they’ve become intertwined with personal banking and business operations has now been shown to be flawed and unsustainable.

We need a new economic architecture, one which will ensure that all the aspects of a successful economy are mutually supporting and continuously sustainable.

And here and now is where that discussion begins. What are the worst flaws in the old architecture? What improvements would introduce in a new architecture?

Or is this talk nonsense and we can continue as we are, continuously reliving the pain of a bust to bring about the rapture of a boom?

I’d love to hear your views! Add your comments below or start a new discussion thread in the Green Options Forum.