Loop of Financial Doom
For the authorities, [excessive risk-taking by the financial sector] poses a dilemma. Ex-ante, they may well say “never again.” But the ex-post costs of crisis mean such a statement lacks credibility. Knowing this, the rational response by market participants is to double their bets. This adds to the cost of future crises. And the larger these costs, the lower the credibility of “never again” announcements. This is a doom loop.
Banking on the State, Piergiorgio Alessandri & Andrew G Haldane
Samizdata auto-critique
Over at Samizdata, the UK’s favourite libertarian gated community, Paul Marks–finding time between predicting the financial crisis, alerting the world to Obama’s incipient Marxism (thanks Paul!), and explaining why WH Smith is threatening our liberty–engages in 检讨–jiǎntǎo, or Maoist self-criticism:
The enemy do not try and refute our arguments, they just sneer.
Quite.
