02.03.1995

Lost Barings

THE BOURGEOISIE was stunned by the total collapse on Sunday night of Barings Bank. By Tuesday losses amounted to £800 million, and the Bank of England warned that Barings is exposed to “unquantifiable further losses until the contracts expire or are otherwise closed out.”

Incredibly, the ‘black hole’ can be traced to ‘rogue’ share deals carried out by a 28-year old dealer named Nick Leeson in Barings’ Singapore office, who was gambling on the casino-like derivatives. These shares speculate in changes on future market conditions.

Showing excessive entrepreneurial zeal, Leeson purchased up to 20,000 packages of share contracts, priced at £120,000 apiece, which were based on predicting movements in the Tokyo Nikkei 225 Stock Market index. The Tokyo stock market fell and the losses started to snowball.

This dramatically exposes the increasingly fragile nature of international capitalism, which is becoming more and more vulnerable to the ‘domino effect’. As The Guardian phrased it, “in financial matters, every bank is linked to every other in an umbilical chain and by breaking one link you threaten every other element, however blameless” (February 28).

Britain and the Bank of England are no longer the financial powers they once were - indeed, it could even be the end of an epoch. The fact that the Bank of England was unable to rally the City around the hapless Barings Bank and come to its rescue will send shock waves throughout the ruling class. The ‘old boy’ network, so valued by our rulers, counted for nothing when it came to the crunch.

The parasitical nature of capitalism in this era of ever increasing globalisation and interdependency is impossible to disguise, much to the embarrassment of many an expert and commentator, whose job is to extol the virtues of the free market and bourgeois democracy.

The potential for an absolutely catastrophic meltdown is immense, given the increasingly irrational and anarchical nature of the system.

Eddie Ford