The tempest

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“It wasn’t infinity in fact. Infinity itself looks flat and uninteresting. Looking up into the night sky is looking into infinity — distance is incomprehensible and therefore meaningless. The chamber into which the aircar emerged was anything but infinite, it was just very very very big, so big that it gave the impression of infinity far better than infinity itself.”

—Douglas Adams, The Hitch-Hiker’s Guide to the Galaxy

The financial markets are cyclical. There are times of fallow, times of harvest, times of maintenance, and times of storm. The activity of all those hardy souls that till the fields of finance: farm-boys, the ostlers, the stable-hands, shepherd-girls; those who sow and reap, those who thresh, those who maintain the machinery by which we harvest the fruits of field, forest and contract — it varies by season, by climate and by weather.

We prune in winter.

We till the soil and plant our seed in the spring.

Once the crops are underway, photosynthetically nourished by the warm summer sun, we go away to Majorca.

We are back in time for harvest: once the book is closed, for three months the senior landholders hunker down to agree how much grain each has earned and what pittance of it each should set aside for their sharecroppers. The interlocking cycles — annual, seasonal, circadian — carry on their ancient ways, interrupted only by intermittent storms, when the agrarian community comes together, puts down their ploughshares and bends all their footsteps towards protecting crops, saving livestock and battening down hatches.

Most times, the storms pass quickly, they bring rain, root out dying lumber, and refresh the soil, with much renewal and little lasting damage.

But the hardest financial gales do not. They set in, howl, and rage, for weeks or months, and they cause us to doubt every precept of our arable philosophy. Unlike actual weather, we do not measure financial storms against a bell curve. They are long-tailed. They are human. The largest are orders of magnitude more destructive than the smallest: they exist inside the collective conscious; they rage though the infinite tiny interpersonal observations: how millions of people, in a swarm, behave. And in the teeth of a gale, the natural order of things; the normal laws of commerce stop working. People behave erratically, irrationally and unexpectedly. Some who have hitherto been upstanding show themselves to be rogues. Some once known to be thoughtful run blindly about, their hair on fire. We find out who has been swimming naked.

Just like financial models, legal models, predicated as they are on a predictable range of behaviours — those evident in rational participants possessed of observable data and crystal clarity as to the prevailing environmental circumstances, tend to break down just when most you need them. These may prevail, in discrete default scenarios, but when an epochal tempest is raging, they will not. Normal assumptions do not apply. We have seen this in all the ten-billion-year storms of our era: the crash of 1929, Black Monday, the First Russian Crisis, the Dot-Com bust, the great financial crisis, and now with this latest Russian crisis.

Now.

The process of putting in place relationship agreements is assuredly a fair-weather activity.

See also

• The Apocalypse