Sadly, It’s Come to This…

The following article ran in today’s Telegraph, as well as in newspapers around the world. It’s a sad, sorry state of affairs when billionaires are committing suicide over financial losses. This is the second billionaire in a week to take his own life. Our economy is in shambles, the world economy is on shaky ground…and President Bush just placed an order for $458,000 worth of new china — 2 weeks before his miserable Presidency comes to an end, and our Senate leaders bicker about whether someone legally appointed by a Governor has a right to serve, creating chaos on the opening day of the new Congress.  Hey, how can Sen Burris possibly do worse than anyone else in Washington?

Adolf Merckle suicide gives crisis grim defining moment
By John Foley, breakingviews.com
Last Updated: 6:32AM GMT 07 Jan 2009

The patriarch of a German family whose assets include a majority stake in HeidelbergCement died on Monday in an act his family attributed to “the desperate situation of his companies caused by the financial crisis”.

Merckle isn’t the first to take his life amid the market turmoil. But his tragedy shows how quickly fortunes have been reversed in the last year, and perhaps how the exposure of folly can make that particularly hard to bear.

Merckle’s situation echoes those of Olivant chief operating officer Kirk Stephenson and Access Partners’ Thierry Magon de la Villehuchet, both of whom committed suicide last year. All faced large, rapid financial losses. All were caught out by forces that may have been hard to accept. Merckle was a once-conservative industrialist seduced by the returns available through heavy leverage. Unable to refinance loans taken out to cover trading losses, including an estimated E400m from short-selling VW shares, he faced a very public liquidity crunch.

Despite such high-profile cases, it’s not clear that market crashes lead to more suicide. The equity rout of 1929 did presage an increase in numbers in the US, but only slightly – and in the context of a previous five-year rise. JK Galbraith noted the fallacy of the “suicide myth” in his account of the time. But studies do suggest that the rate of suicide rises with general economic difficulty, notably rising unemployment. One reason may be that hard times exacerbate stress-related mental health problems and feelings of social vulnerability.

With economic depression now looming, governments should worry about more psychological depression. The UK mental health charity Rethink recently named home repossession as the factor people believe is most likely to trigger mental illness. Tragic deaths like Merckle’s should be a warning that a prolonged slump might have an extra intensity this time round. It has always been a feature of the financial system that investors can lose everything they own. In a leveraged world, the quantum of those losses is dramatically multiplied.

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