Last Night's Comic Relief programme, with its wrenching films about suffering children, put me in sombre frame of mind, despite the jokes, as I'd just finished John Kay's excellent The Long and the Short of It. The book is stuffed with excellent investment advice, some of which I've even already implemented without thinking about it. But the chapter that set me thinking troubled thoughts is one about uncertainty, or Donald Rumsfeld's unknown unknowns.

John cites the famous passage from Keynes (Economic Consequences of the Peace, Ch 2, you can download the book from Gutenberg) which celebrates the glories of Britain's globalised and triumphant world on the eve of the First World War:

“The inhabitant of London could order by telephone, sipping his
morning tea in bed, the various products of the whole earth, in such
quantity as he might see fit, and reasonably expect their early
delivery upon his doorstep; he could at the same moment and by the same
means adventure his wealth in the natural resources and new enterprises
of any quarter of the world, and share, without exertion or even
trouble, in their prospective fruits and advantages; or he could decide
to couple the security of his fortunes with the good faith of the
townspeople of any substantial municipality in any continent that fancy
or information might recommend. He could secure forthwith, if he wished
it, cheap and comfortable means of transit to any country or climate
without passport or other formality, could despatch his servant to the
neighbouring office of a bank for such supply of the precious metals as
might seem convenient, and could then proceed abroad to foreign
quarters, without knowledge of their religion, language, or customs,
bearing coined wealth upon his person, and would consider himself
greatly aggrieved and much surprised at the least interference. But,
most important of all, he regarded this state of affairs as normal,
certain, and permanent, except in the direction of further improvement,
and any deviation from it as aberrant, scandalous, and avoidable. The
projects and politics of militarism and imperialism, of racial and
cultural rivalries, of monopolies, restrictions, and exclusion, which
were to play the serpent to this paradise, were little more than the
amusements of his daily newspaper, and appeared to exercise almost no
influence at all on the ordinary course of social and economic life,
the internationalisation of which was nearly complete in practice.”

This aapparently stable world of course vanished utterly, the certainties of the middle classes of central and eastern Europe overturned. John continues: “The future has not become any more certain.” And he goes on: “People who are today concerned about the Iraq war, China's rise or Climate Change, would not have been worrying about these issues 20 years ago. They would have been worrying about the Cold War, Japan's economic pre-eminence and the effects of AIDS.” His point is that we can't even frame the questions, never mind know the answers, when it comes to fundamental trends. No-one predicts most catastrophes. (pp126-128 of TLATSOI)

Without wanting to be unduly pessimistic, I did feel the shadow of fundamental uncertainty last October when it seemed possible the everyday payments and settlements systems would stop working, and stocked up on a few extra tins of baked beans and bottles of mineral water from Waitrose, in an inept 1914 bourgeois way. Looking at last night's films about the poverty and desperation of so many children in the UK and Africa last night made me ponder again what tensions would prove unbearable in this dramatically sudden recession. I did the bourgeois thing again and sent off my money, and looking at the staggering appeal total (£58m in one night), others did the same. Hope you all dug into your bank accounts too – if not, click on the link above!

By the way, for those interested in more, I posted previously about John's book and it's also reviewed by Jeremy Peat in the forthcoming edition of The Business Economist.