Terra Firma, Guy Hands: The Hands of fate
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Terra Firma, Guy Hands: The Hands of fate

Merry Christmas, but a not too happy new year, was the message from the head of UK private equity firm Terra Firma, Guy Hands.

For Christmas, he sent copies of John Kenneth Galbraith’s book, The Great Crash 1929, to bankers, investors and colleagues. The events that mark the onset of the Great Depression, he says, share similarities with today’s markets. "The most obvious," says Hands’ accompanying letter, "being that complex financial instruments have been invented which no one really understands and have led to a loss of confidence in the banking system."

Hands points the finger not at private equity, hedge funds or structured finance groups but at governments that have encouraged "the development of excess liquidity in the financial system of the West". The letter goes on to say that he expects 2008 and the next few years to be tough unless governments find a way to unwind the loose credit environment they have created without causing chaos. That would surely have sobered up a few drunken Christmas revellers.

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