T5 Adapters — Calex Global

Abstract
What do quantitative easing, crashing property prices, toxic debt, Ronaldo’s £80 million transfer to Real Madrid and David Beckham’s spat with a spectator have in common? Much like the Emperor parading his new clothes, they are all events which provide the opportunity to question how we as individuals and as societies ascribe value.

What is changing?
The concept of value, particularly in the economic sense, is hard to define. On the one hand, it is an assigned numerical quantitative concept, a fair exchange equivalent if you like. On the other, it is an ephemeral, speculative and qualitative concept – a representation of a degree of importance. In practice, the concept of value swings somewhere between scientifically accepted definition and the ideal of what we accept as important. It is this acceptance that gives credibility to value. Acceptance is why 80,000 fans packed the Santiago Bernabeu to see a single player valued at £80 million, on estimated wages of £200,000 per week, at a time when unemployment in Spain is at 18%, the highest in Western Europe. Acceptance is why select governments can print more money and effectively exchange it for a promise of a greater future value. While all these transactions can be backed up by economic models and statistics, when the ideal is called into question – be it the value of a currency as in the case of Zimbabwe, the value of financial transactions such as collateralized debt obligations, or the value of a player, such as David Beckham – it quickly becomes apparent just how fragile value really is.

Why is this important?
As the recession continues to unfold, the question of value is becoming more and more important. Acceptance is no longer guaranteed, which is putting value at risk. Already regulators and shareholders no longer simply accept that remuneration packages of top executives is indicative of the value they bring; banks no longer simply accept that the value of property is as ‘safe as houses’; people no longer accept that the capital injection into banks, as opposed to other businesses or even the public at large, was the right strategy; nations no longer accept that the US dollar should be the de facto global currency. Given the role that value plays in society in terms of helping to create a system of priorities, fuelling innovation, and bringing stability – the risk to values is significant. The chaos, upheaval and potential injury that the demise of an entrenched system of value may bring is challenging businesses, consumers, civil societies and governments alike. For the time being, the assumed ideal of value as we accept it remains largely unchanged, albeit without the same sense of naïve sanguinity. But then assumptions can be challenged in the strangest of ways, as a 16 year old reminded JP Morgan. Should value continue to remain at risk, the difficult question is, should the Emperor be told that he has no clothes on, or should the little boys just keep their mouths shut?

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