The current financial crisis in world markets is the worst since the Great Depression of the 1930s, a leading Bermuda businessman has warned.

And Sir David Gibbons added that after Bermuda's largest US tourism supplier was hard hit by the recent downturn in markets, it can have a significant effect on Bermuda tourism.

Former Premier and Finance Minister (both at the same time for a significant length of time), Sir David is CEO of Gibbons Co. and the most recent past chairman of the Bank of Butterfield.

He is also a director of Massachusetts Financial Services (MFS), the largest New England mutual fund provider, itself a victim of the recent market volatility.

Inventor of the mutual fund in the early 1920s, MFS had $93 billion under management before the recent drop by some $10 billion.

MFS has several million shareholders, especially in the New England area where a lot of Bermuda's US visitors come from. At meetings last week, Sir David heard estimates that Americans are poorer by $1.6 trillion as a result of the recent decline in the stock market. Historically, Americans stay closer to home in times of economic uncertainty.

But unlike the past, authority figures are on the ball warning that panic will make it worse.

The latest issue of Business Week contains a similar message in a commentary from economics writer, Howard Gleckman, entitled "Let's Not Talk Ourselves into a Downturn.'' It warns: "Cool it. If pundits and investors keep panicking, they might turn a mere slowdown into a recession.'' For all of the gloom and doom we are exposed to from the US media, there are indicators that there is no deep recessionary hole...yet.

US unemployment is at 4.6 percent. Remember when it was double digit? US auto sales rose six percent last month and consumer confidence remains high. The economy continues to grow.

Financial crisis worst since Depression, Sir David says And chairman of the Federal Reserve Board, Alan Greenspan, in a rare move, last week cut interest rates between meetings of the Federal Open Market Committee (FOMC).

It was the second 0.25 percent cut in three weeks of the federal funds rate on overnight loans between banks, which is now down to 5.00 percent. It also reduced the more symbolic discount rate for Fed loans to banks by 0.25 percent to 4.75 percent.

Mr. Greenspan is well remembered, and respected, by Bermuda's financial leaders from two decades ago when he was an advisor to the Bank of Bermuda.

Having had an acquaintance with Mr. Greenspan, Sir David sees a hidden significance to the latest move.

He said, "For a very careful, prudent man who always proceeds with due deliberation, the second cut without another FOMC meeting, shows that he is concerned about the impact of these failures elsewhere.'' He said, "Some 30-odd percent of Bermuda's gross domestic product is tourism, but it employs so many people that any impact on that sector could be significant.

"I couldn't have been happier than when Mr. Greenspan made a second reduction in interest rates, indicating that at the next FOMC meeting in mid-November, he could well act again, providing a stimulus in the US that could avoid the type of downturn that could really affect tourism.

"Bermuda has to appreciate that although nothing pervasively detrimental has happened so far to hurt us and it possibly can be avoided, it may be necessary to take steps to offset any potential loss.'' He recalled the Department of Tourism's alert advertising campaign of bygone years that capitalised on the decline of the US dollar by telling Americans that although the US buck may be worth less against the Yen, the Pound, the Mark and the Franc, it was still worth the same in Bermuda.

He said that it was important that Bermuda was prepared with a fall back position, in the event that the recent market troubles affect tourism.

Sir David began reading Economics at Harvard in 1944, three months after D Day when the Allied Forces mobilised into Europe to challenge Hitler in the Second World War.

He said, "It is my view, that this is the worst financial crisis we have seen in 60-odd years, since the Great Depression. There is no question about it.

"If you take the Far East as a whole, Japan is in recession. Their imports have dropped significantly. The unemployment has leapt to unheard of heights in Indonesia and Malaysia. This could happen in Brazil. Hopefully, it won't.

"But all the people out of work has meant the market for US exports has diminished significantly. There is a loss of export earnings.

"Part of the reason values of companies on the New York Stock Exchange have dropped is because those markets won't be buying a long list of regular consumer products, they had been buying in the past.

"Loss earnings in the US will mean the people will give up luxuries, buy less, borrow less and travel less. That's how it affects Bermuda.'' The bright side of it all, however, is Brazil, which may hold the key as a stabilising force. A country that used to have 40 or 50 percent inflation a month, now seems to have it under control at around seven percent a year.

The administration of re-elected President Fernando Henrique Cardoso will have to persuade the country's congress to hold the line on government spending as part of a package of austerity measures. The country will also have to attract some international support, including from the International Monetary Fund.

Brazil is 44 percent of the South American market. If Brazil prospers, it will have a positive effect on the entire continental region.

Sir David said, "South America represents considerably more of the US export trade than does Asia.'' And true to the motto emblazoned on his family's crest, the businessman remains optimistic about Bermuda's voyage in the current troubled financial waters.

"Semper Optima Sperans'' the motto reads. Translated from its original Latin, it means "Always Hoping for the Best''.