Lord Palmerston said of the Schleswig-Holstein question that it was so complicated, only three men in Europe ever understood it. "One was Prince Albert, who is dead. The second was a German professor who became mad. I am the third and I have forgotten all about it." When historians look back at the Economic Crash of 2008, amid all the noise and hullabaloo from commentators who claim to understand what happened, only three people's views will need to be taken seriously. The first is Alan Greenspan - Sir Alan Greenspan to give him his full title, for the British thought so highly of him that they knighted him.
His view of the boom and bust should be limited to the fact that he helped cause it. He was hailed as an economic guru, his every utterance, however gnomic, was swallowed by a rapt audience. When he warned of "irrational exuberance" it was taken as an indication to keep partying, rather than as a warning that unless people's behaviour changed, there would be a crash. Now he is rather like a mad scientist who has created a machine that turned into a monster. "If only I could tweak the controls," he says, laughing like a hyena. The trouble is nobody is listening any more. If the queen had her time again, she would probably stick him in the stomach with her sword rather than touching him lightly on both shoulders. His opinion is as good as dead.
The second would be Warren Buffett, the sage of Omaha. Having made his fortune on the back of America's booming companies, he managed to sidestep the dotcom bust and even much of the subprime mortgage fiasco. However, he called the bottom of the market last autumn, and watched as it fell further. For him, there is no crisis, just a buying opportunity. Is he mad? Finally there is George Soros, the man who broke the Bank of England in the 1990s. Mr Soros has seen the light. He thinks that unfettered capitalism is not only absurd, but dangerous. He does not agree that the recent rally is the start of a bull market, but more of a dead-cat bounce because the US economy is still contracting. He would prefer to forget about it.
However, I sense that after last week's events at the Group of 20 meeting in London, many are breathing a sigh of relief, as if they have got away with it. Every world leader returned to their country believing they had agreed what they already believed in. Thus Barack Obama, the US president, probably went home thinking capitalism was saved, Angela Merkel, the German chancellor, tottered back to Berlin or wherever she lives, thinking that the mittelstand - Germany's manufacturing heartland - is the way forward, while the UK prime minister, Gordon Brown, figured he had a good chance of winning the next election, but rather wished his wife looked like the little Frenchman's missus. The Canadian prime minister, who missed the first photo shoot, probably returned home feeling a chump, but then he deserved it.
Business leaders can take heart from the blinkered view of politicians. John Krenicki, the vice chairman of GE, flew into Abu Dhabi on a Middle East tour last week. He was optimistic about the future, slightly concerned about protectionism and nationalism, saying "when economies get difficult, people hunker down", but unrepentant. GE, a boring maker of turbines and windmills, desalination plants and nuclear power stations, also had an exciting arm doing tremendous finance things. GE Capital may not have called for TARP assistance - or US government bailout funds or whatever they are calling it this week - but by any standards, it is not in good shape. Trouble is, exotic finance instruments have a habit of biting you sharply on the behind. GE had to cut its 2008 earnings forecast by US$3.5 billion (Dh12.85bn) to reflect GE Capital's potential losses. By the end of June last year, GE Capital had $60bn of shareholders' equity supporting $700bn of assets, some of which threatened to be toxic. Not an ideal situation to be in, or so I thought.
"GE Capital was too successful," he said. "We wish our industrial businesses were as successful." This rather reminded me of the US general in Vietnam, who calmly told a press conference that his troops had "destroyed a town in order to save it". This month GE finally lost its coveted "AAA" rating, with Standard & Poor's cutting it back to "AA plus". The reason is, of course, the concern over GE Capital. GE has consistently said that it wants to keep the financing arm, because it helps the firm sell its turbines if they can offer financing. But Mr Krenicki said that GE's $8bn worth of sales by its GE Energy division since the end of 2006 were achieved without any help from GE Capital.
In Mr Krenicki's world, the financial meltdown is a momentary blip which will not get in the way of progress. The American Way is alive and well. Capitalism is alive and kicking, even if it is sick. It is reminiscent of the knight in Monty Python's The Holy Grail, who wants to fight on, even though his arms and legs have been cut off. "Cowards," he yells, unrepentant and unaware that he is doomed, as his attackers ride off.
The attackers are capitalism's critics. Everybody, it seems, wants more regulation, even Mr Krenicki. But not just at the moment. They want to get rid of tax havens, too, but this will take time. This is like Saint Augustine, who urged God to give him "chastity and continence, but not yet". But the longer we wait, the less likely it is that anything will change. We would all like to be like Lord Palmerston and forget all about the crash. But if we do that, it will just be a matter of time before it happens again.
rwright@thenational.ae
