Yet within the span of my own career, the world of international finance has enjoyed a renaissance - a spurt of creativity in the 1970s and 1980s, when new techniques emerged which have transformed the conduct of many banks and bankers. Swaps, options and futures are simply contracts which allow the parties concerned to exchange one form of payment for another. Even housebuyers keen to lock in fixed rates are unwittingly using swaps and options. Now the tail has come to wag the dog. The efficiency and effectiveness of these instruments has meant that the derivative markets are so large and so liquid that they now drive the real markets, rather than the other way around.
Some economists even fear that derivatives threaten the stability of the financial system.
They have certainly made the financial condition of companies more opaque, as accounting conventions have not kept pace with invention. Whereas 15 years ago the bulk of a bank's business would be accounted for in the traditional way, today much of the important business is in derivatives which do not show up on the balance sheet at all, but are recorded in contingent accounts. So the effect of derivatives on banks' ability to monitor and manage their businesses has been profound. When eventually I faced up to the knowledge gap, the question was what to do about it. There was the easy option - to pretend that the problem did not exist.