"I.O.U."

[fiefoe]

The money quote: "The credit crunch was based on a climate (the post-Cold War victory party of free-market capitalism), a problem (the subprime mortgages), a mistake (the mathematical models of risk), and a failure (that of the regulators.) "

• And then the good guys won, the beauty contest came to an end, and the decades of Western progress in relation to equality and individual rights came to an end.
• The jet engine of capitalism was harnessed to the oxcart of social justice... The jet engine was unhooked from the oxcart and allowed to roar off at its own speed. The result was an unprecedented boom, which had two big things wrong with it: it wasn't fair, and it wasn't sustainable.

• The fact that noneconomists see the general assumption of rationality as self-evidently ridiculous has no effect on economists.
• As Keynes... observed, there is nothing so disastrous as a rational policy in an irrational world.
• The crisis exposed the economists as being a little like the British army at Singapore, its guns pointed in the wrong direction.
• The last decades have seen numerous 5-, 6-, and 7-sigma events... Yet no one concluded from this that the statistical models in use were wrong.
• They weren't just wrong in the practice, the way you are wrong if you call heads and a coin lands tails; they were philosophically wrong. They were exposed as doing something which was contrary to the nature of reality.

• The reason why (Greenspan) was and would continue to be reluctant to burst any bubbles: who was he to interfere int he operation of the market, which by definition was wiser about itself than any individual could be?
• "An underlying assumption of financial regulation in the US, the UK and across the world, has been that financial innovation is by definition beneficial, since market discipline will winnow out any unnecessary or value destructive innovations.

<<