LEWIE Ranieri was one of the stars of Liar’s Poker, Michael Lewis’s fantastic expose of excess on Wall Street and in London in the 1980s.
At his best, the Salomon Bros trader, who pioneered the kind of mortgage-backed bonds that brought the financial system to its knees last year, was taking home somewhere between $US2m and $US5m a year. He famously owned more powerboats (five) than suits (four). He was, in the vernacular of the times, a big swinging dick. A master of the universe. A Gordon Gekko before Oliver Stone and Michael Douglas brought the fabulous rogue to life.
You didn’t get much more colourful or successful than Ranieri (who, incidentally, is still mooching around Wall Street as a fund manager). But, for anyone with more than a passing interest in matters financial, his salary, so celebrated at the time, now looks absurdly small. Telstra’s David Thodey, who’s running a regulated utility at the bottom of the planet and drives a Toyota Corolla, will earn more most years.
Until very recently, a trader with the skills and cojones of Ranieri could have been taking home $US20m – and expecting another $US20m bonus. Goldman Sachs chief executive Lloyd Blankfein once took home a $US60.7m bonus. There were reports of hedge fund managers collecting $US1bn in salary and bonuses. And in Australia, we all know about Nicholas Moore’s $30m-plus paydays at Macquarie.
Twenty years of inflation counts for some of the difference. But only a fraction. Somewhere between the early 1980s and 2009, the financial world discovered a secret, untapped reserve of zeros. The financial sector grew by creating new markets, new products and finding investors - often each other - to buy them. As it became more complex, they paid themselves more to manage it. Suddenly the world had a $US60 trillion bond market. Stock markets were worth $US50 trillion. Some of this money was real. Some of it, we now know, was imaginary.
Re-reading Liar’s Poker recently, the parallels with the sub-prime mess that led us into financial meltdown are unnerving. The only thing you’d have to substitute is Lehman Bros for Salomon Bros (now part of Citigroup) and then multiply every figure mentioned in the book by 10, 20 or more.
The financial world doesn’t work in millions and billions anymore. It works in billions (usually hundreds of billions) and trillions. And the higher we go, the more meaningless the figures become.
What does it mean that the Australian stock market lost $1 trillion in value last year? Or that Barack Obama reckons it will take $US1.7 trillion to fix the US banking system? Or that the world’s banks have lost close to $US1.5 trillion since the crisis struck? Or even that Kevin Rudd reckons we need to spend $43bn on a fast internet service? What is $1,000,000,000,000 anyway? How many stacks of banknotes to the moon or around the equator?
How can any ordinary human rationalise these figures - the kind the media and politicians love to throw around to show they comprehend the magnitude of the problems and have a handle on the solutions?
They can’t. And they don’t really have to. They’re not much good for anything except headlines and dinner parties.
But do be aware that the financial world, since Ranieri’s heyday, has become a living, breathing monster with more zeroes than the Imperial army and the potential to ruin us all.
Sleep well.
Facebook Recommendations
Read all about it
Punch live
Up to the minute Twitter chatter
In my sports column on The Punch tomorrow: why Eurovision was easily the best game on the weekend. Mummy bloggers, you'll like this one!
Recent posts
The latest and greatest
Abbott’s crass logic: trash the Parliament in order save it
An email was sent to almost every politician in Australia this week saying that someone should cut off…
Our special forces don’t always need special treatment
We admire them, but we’re not entirely sure why. We allow them to operate in the shadows; we rarely…
A good holiday is about unrest, not rest
Like a fat full-stop, it lay in my hand. A small orange – not exactly fresh, but purchased anyway…
Nosebleed Section
choice ringside rantings
From: They must pay for one’s bitter disappointments
Michael S says:
"A teacher at Geelong Grammar had criticised her for using words that were too long, which had left her confused and had made her doubt her ability to write essays. She became ''quite distressed'' when her English marks began to fall." I can sympathise. My scholastic mentors conveyed to me a causal relationship… [read more]From: Welfare for breeders is a bonus for everyone
Change Up! says:
I have no problem paying my taxes. As a single, childless person on a very decent income, I can afford it and not have my life severely altered. Plus I understand that my taxes paying for things like schools, childcare and infrastructure is ultimately a good thing. A better community is better for me… [read more]Gentle jabs to the ribs
They must pay for one’s bitter disappointments
A private school girl’s family is sueing her elite, extremely expensive private school for not… Read more
Most commented