Five years ago, the markets plunged into an Alice-in-Wonderland world. For when Lehman Brothers collapsed, the repercussions were so violent investors were faced with confronting “six impossible things before breakfast” each day, to paraphrase Lewis Carroll.
So as markets mark the anniversary of that Lehman collapse, is the system any safer or saner? The answer is both “yes” and “no”. The good news is the chance of another full-blown banking crisis has receded: some of the crazier innovations have been reined in, banks are better capitalised and financiers more cautious.
But the bad news is that the system is just as insane – perhaps more so. There are a host of developments that are at best counterintuitive, and at worst dangerously bizarre. Investors may no longer face six new banking shocks before breakfast, but there are at least six peculiar features of the post-Lehman world that might make Alice blink.