Thursday, July 02, 2009

The bomb-thrower's crystal ball

The bomb-throwing Dutch FT columnist Willem Buiter has angered many people, with accusations such as those he made while standing in front of the Great and the Good (!) of Wall Street and the U.S. regulators, that there has been ‘cognitive regulatory capture’ of the Fed by Wall Street."

Now look at something else he wrote.

"Financial markets also can and do shift the non-diversifiable risk in the economy to the imprudent, the reckless, and the fraudulent. The misalignment of the private and social costs of risk that causes such perverse risk trading occurs for legal and institutional reasons and because of asymmetric information among the parties trading risk. . . . When risk is mispriced and misallocated, financial crises and collapses can occur."

What's so special about that? Everyone's saying it.

Nothing - except that Buiter wrote that in 2000. Here is someone who knows what he is talking about. So in that context, be reminded of another of his headlines: Blockade the Tax Havens.


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