City boy ‘dreams’ of making money from recession

Financial trader Alessio Rastani has caused outcry with his frank TV admission that he plans to get rich off global financial disaster. Some now call for a radical overhaul of capitalism itself.

Sharp-suited, with slicked-back hair and a bold pink tie, Alessio Rastani looked the very embodiment of a city slicker. There was no clue, as he prepared for his BBC interview, to the size of the bombshell he was about to drop.

Amid ongoing financial turbulence and the terrifying Eurozone crisis, he was asked, how can politicians restore confidence in the global economy?

'I'm a trader,' he replied. 'We don't really care that much how they're going to fix the economy, how they're going to fix the whole situation. Our job is to make money from it… The market is toast.' To general astonishment, he continued: 'I dream of another recession… It's an opportunity…. You can make a lot of money from this.'

Anyway, he argued, politicians are powerless to prevent the coming crash: 'The government doesn't rule the world. Goldman Sachs rules the world. Goldman Sachs does not care about this rescue package.'

Viewers were stunned at this extraordinary display of unconcern. Rastani was describing a recession as a good thing – a recession which, he admitted, would wipe out the savings of millions of people. So implausibly heartless did he appear that the interview was initially thought to have been a hoax.

But Rastani is a genuine city trader – albeit not a terribly successful one.

Worse yet, according to expert commentators, his frankly put views are shared by many at the top of the financial world. The others just know better than to say what they all think.

The existence of men like Rastani – so focused on personal profit that they are willing to cheerfully contemplate the prospect of a devastating recession – came as a surprise to many. Overnight, this previously unknown trader has become a hated symbol of the recklessness and amorality of the financial sector as a whole.

Time for change?

It's easy to get angry about Rastani's unashamed greed. Rightly so, many argue: the present financial crisis was created by the irresponsibility of such people. What's needed now is a reinvented capitalism which is focused on the global good rather than on narrow personal gain. Governments must intervene to reign in private ambition.

But some businesspeople say it is precisely the pursuit of personal gain that makes for a thriving economy. Adam Smith, the great 18th Century economist, proposed that the collective effect of millions of individuals striving selfishly to get ahead was in fact to advance society as a whole. Ruthless competition encourages innovation and creates wealth. We should not, say Smith's disciples, suffocate these energetic individualistic urges beneath the wet blanket of government regulation.

You Decide

  1. Is Alessio Rastani disgraceful or just sensible?
  2. Can selfish actions lead to general benefits? How?

Activities

  1. Do some research into Adam Smith, the founder of modern economics. What was his big idea and what made it revolutionary? Present your findings as an article or graphic.
  2. Educate yourself about market forces. Discuss the terms or practices that you don't understand, and create a glossary of terms – with information about their benefits, or why they are seen to be damaging.

Some People Say...

“There's nothing wrong with looking out for number one.”

What do you think?

Q & A

How can anyone make money from a recession?
There are a few methods. Short selling, for example, which is legal but widely condemned. A short seller borrows assets from a third party, and immediately sells them. He or she will need to return the assets at a later date – but will buy them again when they reduce in value, thus making a profit.
Any other techniques?
Yes. Money can also be made from a downward market by investing in safer assets like the US dollar or gold. When global finance is in trouble, safer assets become more popular and so more valuable.
So can we all be recession proof?
No. It takes a certain amount of financial know-how, and some money saved up. For most people, a long recession would be very bad news.

Word Watch

Trader
Being a trader is one of the most high-stress jobs in finance, but is also one of the most lucrative. Traders buy and sell commodities, stocks, shares, bonds, derivatives and all sorts of complicated financial instruments, hoping to make a profit. The essential guideline: buy low, sell high.
Goldman Sachs
An American banking firm, founded in 1869. Goldman Sachs specialises in investment banking, securities trading and corporate clients, and is known to have a great deal of influence in US financial policy.
Recession
A recession is a sustained period of shrinkage in an economy. That means fewer jobs, lower salaries, vanishing savings and collapsing share prices. All in all, it's very bad news.
Amorality
Being amoral means having no morals. It is different from being immoral, which means having morals but acting against them.

Subjects