We may have just lived through the biggest financial crisis in 80 years, but its impact may still not have been big enough for people to learn the right lessons for next time.

Philip Wood, special global counsel at Allen & Overy, told today's Reuters Restructuring Summit in London's Canary Wharf that the effects on the Western world's populace of the credit crisis, while large, have simply not reached the proportions of 80 years ago.

"Do people remember (the lessons from a crisis)? Sometimes they do."

It took 140 years for the British to get over the South Sea Bubble of 1720 and introduce the Companies Act in 1862, he said.

"German inflation of the 1920s still casts a shadow over the German folk memory," he added.

"(But) I'm not too sure people will remember much about this one. Apart from a few unpopular people losing their jobs, it's not hit the population in the same way the Great Depression has, where people were hungry... it was catastrophic.

"We've lost a year's GDP, but for most people it's been a remote, silent whirlwind."

Wars have numerous costs and most of those are unimaginable for most of us not in the middle of one.

But, aside from the tragic cost of death or injury, wars also cost a lot of money to finance and President-elect Barack Obama will be facing some of those costs (as well as a whole mess of other stuff) when he takes office in January.

As the United States grapples with a severely struggling economy, a number of federal bailouts and questions about our overall financial shape, Obama will also have to decide rather quickly how he will prosecute the wars in Iraq and Afghanistan and the staffing of the military.

On Monday, Loren Thompson of the Lexington Institute and Richard Aboulafia of the Teal Group spoke at the Reuters Aerospace and Defense Summit about the kinds of challenges Obama will face and just how much this is all going to cost.

Thompson (who you hear speaking first in the audio clip) and Aboulafia have been at our summits before and are always highly engaging and well-informed guests. But this year, maybe more than we’ve ever seen, the two warned that the problems facing the country and the defense sector were as serious as they have seen.

Staffing the military is an expensive proposition and it’s getting more so, the two concurred. And a government with a lot on its plate might be forced to take a second look at staffing committments. They think Obama will.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

The world is a more dangerous place because of the global economic meltdown, according to Northrop Grumman Chief Executive Ronald Sugar, whose company provides specialized aircraft, radar and other electronics to meet that threat.

Sugar was the kick-off speaker at the annual Reuters Aerospace and Defense Summit on Monday in Washington, D.C.

Sugar acknowledged that hunger and thirst could not be solved with his company’s products but  argued that diplomats dealing with the world’s woes would be more likely to be successful if diplomats followed President Teddy Roosevelt’s famous dictum.

“You only talk if you have a big stick,” he said.

The Aero and Defense Summit is the final one of the year. In 2008, Reuters has had 33 summits around the globe and have as many or more planned for 2009. Our previous gathering, Reuters Investment Outlook Summit, provided clients with an excellent look at how to manage through what will certainly be a challenging 2009.

– Additional reporting by Diane Bartz in Washington

The Reuters Middle East Investment Summit in Dubai was hit by the whirlwind visit of British Prime Minister Gordon Brown across the Gulf as he looked to drum up support for ailing British firms and convince Gulf investors the IMF’s bailout fund was a safe place to put their cash. After courting Saudi Arabia and Abu Dhabi, it was a fleeting visit to the region’s commercial hub Dubai. As his motorcade flew passed the world’s tallest tower But hark…we have seen this before. President George Bush headed to the United Arab Emirates more than a year ago. But that’s where the similarities stop. For Mr Bush, Dubai ground to a halt. Chaos ensued. Streets were closed. Workers sent home. The President was in town, so that was that. Fast forward November 4, 2008. Mr Brown is here. Dubai is business as usual, although The Prime Minister’s motorcade did delay a speaker for the Reuters summit. Perhaps the credit crunch has meant random days off are no longer on the Dubai agenda……. unless you’re the President of course.

There are some who say the economic downturn means ambitious plans to fight global warming should be put on ice.

But Wolfgang Ruttenstorfer, the head of Austrian oil and gas group OMV, reckons cutting carbon emissions is inevitable in the long run, despite the financial crisis and its impact. 

“I think the price signals of the last two years will not be forgotten by consumers and politicians and therefore the thrust towards renewables will continue, maybe at a slightly slower pace,” he told the Reuters Central European Investment Summit. 

For some, going green is a luxury in harder economic times: Poland and Italy aren’t too happy about European Union legislation to fight climate change and say it could hurt their
economies at a time of slower growth.

The EU has stressed that climate plans will be affordable but as the worst financial crisis in 80 years continues to unfold there are doubts over whether there will be enough money or willpower to invest in cleaner energies.

“We stay committed,” Ruttenstorfer says. “We have our future energy fund and we will continue to work on this and definitely not put it on the shelf.”

OMV has been aiming to make its refining more environmentally-sound, to cut down on carbon dioxide emissions and is participating in pilot carbon capture projects. Cleaner gas-fired power plants are also seen as a good option by the company.

“In the medium and long-term, this (environmental) situation will not go away,” Ruttenstorfer says.

Spare a thought for the mega-rich.

While the man or woman on the street cuts back on non-essential spending as the value of their home falls and they worry more about whether or not they will keep their job, so too multi-millionaires are feeling the pinch.

Javier Arus Castillo, general manager of Santander Private Banking International, explains.

“With the markets down, if you have lost $100 million and have $300 million left then that makes you think. Your life is not going to change but you start to feel a little concerned.

“The top people who have their own plane or have NetJet shares of $8 million and one-third of a jet are now saying ‘does it make sense that to fly from Latin America to Europe costs me $100,000? Maybe I should buy a first class ticket.’”

Puts our own worries in perspective.

There’s no shortage of commentators lining up to opine on how much the troubled hedge fund industry is likely to shrink as the credit crisis unfolds.

So when someone talks about the industry being in “meltdown”, it is good to see they are backing up their dramatic views with some dramatic actions.

Enrique Marazuela, chief investment officer of Spain’s BBVA Patrimonios, says his clients have slashed exposure by more than two-thirds over the past year because the returns and risks are simply not what they were expecting.

On Monday Union Bancaire Privee (UBP) said it has taken down exposure to 20-25 percent from 30 percent at the end of last year.

Again, it says returns - running almost into double digits losses so far this year for the industry - have been disappointing.

Wealthy clients were the foundation on which much of the $2.6 trillion hedge fund industry’s early growth has been based.

UBP says the industry could shrink by one-third over the coming quarters as investors withdraw assets.

But if other wealthy clients are doing what BBVA is, then the shrinkage could be much more dramatic.

The credit crisis may be hitting the man on the street hard, but spending by the “other half” on the latest super yacht or Damien Hirst work of art looks set to carry on relatively unaffected.

Super-wealthy individuals in commodity-rich areas such as Russia and the Middle East are reaping the benefits of a five-year boom in oil and other commodity prices.

Even though oil and commodity prices are now coming off sharply, the boom is still feeding through into their spending power, provided they haven’t done anything too risky with their cash in the meantime.

And it’s happening just when everyone else is cutting back on non-essentials.

“It’s like philosophy,” explains ING’s Deputy CEO of Private Banking Bernard Coucke.

“Philosophy always comes after a century of economic prosperity, never before. Spending always comes after prosperity, never before.”

For Marc Holliday, chief executive of SL Green Realty Group and Gramercy Capital Corp, the Tom Petty lyrics ring especially true.

Holliday, speaking at the Reuters Global Real Estate Summit, said on Tuesday that his company is waiting with bated breath to hear about which company has won the award to expand the gaming options at New York City’s borough of Queens-located Aqueduct Race Track.

In April, three companies where chosen as finalists for the rights to expand Aqueduct with thousands of video lottery terminals (VLTs) that the state hopes will eventually give it $300 million a year of revenue.

The companies include Holliday’s SL Green, Delaware North, and Capital Play Inc, whose partners include the Mohegan Tribal Gaming Authority and Victoria Racing Club. 

But things in the New York capital of Albany have been a little dicey recently — especially since former Gov. Eliot Spitzer has left office following a sex scandal and new Gov. David Paterson has questioned whether the things Spitzer agreed to about the expansion plan are binding or if there’s some wiggle room there.

So, anyway, that leaves Holliday and his competitors waiting. SL Green has a plan ready to roll, he said, and that could mean that the preliminary expansion could be ready six months after approval.

Holliday was one of the featured speakers at this year’s global real estate jamboree — which takes place in New York, London, Singapore, Moscowh and Dubai.

Plain vanilla, in the box, straight financings are the future, or at least near future, of real estate deals, says Marathon Asset Managing Director Scott Schwartz.

“Either the Street kinda comes back and supplies leverage, or people have to get their returns without leverage. And right now we’re at a point where people have to get their returns without leverage. So that’s why there aren’t a lot of deals happening,” he said, speaking at the Reuters Global Real Estate Summit.

The heydey of commercial mortgage markets was greased by easy money from Wall Street banks, which routinely made short-term loans to investors who wanted to invest the proceeds in longer-term assets, such as commercial mortgage-backed securities. The onset of the U.S. credit crunch last summer has pinched banks’ balance sheets, forcing them to rein in the credit they provided to these investors.

(Photo credit: Reuters)