The strange silence is hard to bear

LISTEN! Hear that virtual silence? It's the sound of very little happening in the world's financial markets.

Here the odd thud, as the dollar has one of its regular tussles with the yen; there the occasional thump, as Mexico falls over another ledge - but no real crash, bang, wallop.

Yet with the world's financial system facing at least US$1 billion of losses from the Barings fall-out, it might have been thought that the noise of crashing markets and meetings of senior statesmen being called would be deafening.

This lack of panic is even more surprising because it follows the exact type of event has long been suggested would trigger the Next Great Crash.

It would have seemed obvious that a system which could allow one trader to sweep one of the most reputable banks in the world off the board would have been too fragile to stand up to the consequences.

It could be argued that the reason that there has been such a subdued reaction is that the markets have matured, and the contained nature of the problem has been recognised.

The predictable calls for an outlawing of derivatives have found no echo, although the usual crop of investigations will take place.

Whether they will find anything to add to familiar warnings about derivatives is unlikely.

The Group of 30 leading industrialised nations had laid down guidelines designed to ensure that a rogue dealer was rapidly detected. They were obviously not followed at Barings, and the price has been paid.

That is a price which may be paid again and again. This time, not by the market system as a whole, but by the individual houses whose guard comes down.

There is still danger out there. This time a properly regulated exchange, which would obviously be backed by domestic or even international authorities, was involved. But what happens when the deals are done in the dark? What of the over the counter market, where counter-party risk can only be guessed at? The danger has not gone away, but it has moved on, and when it re-emerges it will, like the Barings debacle, be in a place which no-one expected.