If we don't admit now how the credit crisis confounded us, we haven't a hope of learning its lessons.
Central Bankers met in the amusingly named Jackson Hole, Wyoming, at the weekend to compare credit crisis war stories.
These new Masters of the Universe have much to smile about. They've steered us through the chaos wrought by Wall Street's original self-styled Masters, and they've seemingly saved us from a second Great Depression. Economies are moving into growth, and stock markets are up.
The US Federal Reserve Chairman Ben Bernanke will even keep his job.
The danger is we forget how close we came to the brink. Accordingly, Jackson Hole saw Jean-Claude Trichet, President of the European Central Bank, remind bankers that lessons had to be learned:
"Now that we see some signs confirming that the real economy is starting to get out of the period of 'free fall' […] the largest mistake we could make would be to forget the importance and the urgency of this task."
I agree. It's amusing to see all the newspaper columnists, discussion board posters -- and even myself -- over-estimating how much of the historic events of the past two years we saw coming.
So let's follow Monsieur Trichet's suggestion and admit to some things that blind-sided us all.
1. We never thought we'd see a bank run in the UK
As battle weary credit crisis veterans, it's too easy for us to dismiss the collapse of Northern Rock in summer 2007 as a provincial blip compared to the later drama.
Yet Northern Rock was the UK's canary in the coalmine.
This was the age of online banking, big institutions and savvy consumers. The prevailing wisdom was that the closest thing we'd ever see to a bank run again were Mary Poppins repeats on Boxing Day.
Yet barely had the BBC's Robert Peston told people their money was safe in troubled Northern Rock than queues had started forming outside.
Evidence of how this caught the authorities unawares -- whatever they say today -- is their lackadaisical attitude in the early stages of the Northern Rock crisis.
The Fool's own Stephen Bland was one of the few who pointed out it was very rational for savers to withdraw money. Yet even this safety-first investor was holding the doomed shares!
2. We never thought we'd see Lloyds and RBS part-nationalised
Northern Rock was taken over by the Government in February 2008 -- something it had said it wouldn't do, and that seemed almost ridiculous to contemplate after two decades of financial deregulation.
Yet more was to come during the meltdown of September and October 2008, when the UK Government's Bank Rescue Package combined loan guarantees with direct state investment in Lloyds, Royal Bank of Scotland (LSE: RBS) and HBOS (which was itself being merged with Lloyds (LSE: LLOY) -- another unthinkable happening).
Anyone who predicted this in 2007 would have been dismissed as a card-carrying member of the lunatic fringe.
Even in early 2009, some were declaring that the UK government would 'never' take RBS and Lloyds into full state ownership, and that buying the bank's hugely discounted corporate bonds was a 'no brainer'.
Full nationalisation was certainly undesirable and it was possibly very unlikely -- but I think some punters were overly-confident.
There was a good risk-reward case -- the best investors judged it accordingly and have made a killing. But those dumbly banking on 'never' have learned nothing.
3. We never thought the Wall Street titans could collapse
For as long as I've followed the markets, it's been near-axiomic that the Wall Street investment banks come out on top.
From the collapse of Long Term Capital Management in the late 1990s to the Dotcom bust and the subsequent credit boom, the big five -- Goldman Sachs, J.P. Morgan, Bear Sterns, Merrill Lynch and Lehman Brothers -- made money whatever the weather.
2007 bonuses were a record-breaking $39 billion. Yet -- as has been asked ever since -- why?
As I write, three are effectively gone -- Bear Sterns, Merrill Lynch and Lehman Brothers -- while the other two changed their business structure and sought government handouts to survive.
The most dramatic collapse was Lehman Brothers, which was allowed to fail in September 2008 -- yet another never that subsequently happened.
Those close to the markets say the decision caused the equivalent of a financial cardiac arrest. Who thought that could be happen in the era of modern, supposedly diversified and de-risked global finance? Clearly not the US authorities.
4. We never thought we'd see UK interest rates at 0.5%
The UK base rate is 0.5% -- the lowest in the Bank of England's 315-year history.
Anyone who saw this coming is either rich or a liar.
In September 2007 -- even as Northern Rock failed -- base rates were 5.75%. As recently as August 2008 they were 5%.
Investors who confidently expected rates to plunge to near-zero could have made a fortune buying gilts. But I'd imagine the number who truly expected Japanese-style rates in 2009 can be counted on one bejewelled hand.
Most of the smart money was talking up the inflation protection of index-linked gilts as a result of surging commodity prices.
5. We never thought the stock market would fall nearly 50%
Finally, there's the massive bear market that saw the FTSE 100 plummet along with other global markets -- between October 2007 and March 2009 it shed 48%.
Unlike my other examples, it's fair to say some doomsters did predict the collapse of the stock markets -- but I'd argue some doomsters ALWAYS predict the collapse of the stock markets.
Indeed, most people I've noticed who were bearish in 2007 are still bearish today -- and they also expected further falls as the rally began in March.
A few well-balanced voices did predict a significant correction in shares back in 2007. Legendary investor Anthony Bolton was one and the Fool's own Maynard Paton was another.
But even they weren't looking for a 50% correction. The fact is two big lurches downwards in the UK stock market within a decade of each other is probably a once-in-a-lifetime event.
Most of us weren't prepared and -- whatever we vow today -- we'll not be prepared the next time.
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