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April 15, 2008
I'm off to New Zealand for 2 weeks holiday. You can follow the progress on junk for code. In the meantime we have this interview with George Soros on the global financial crisis. In response to the question, 'Was this crisis avoidable?', he says:
I think it was, but it would have required recognition that the system, as it currently operates, is built on false premises. Unfortunately, we have an idea of market fundamentalism, which is now the dominant ideology, holding that markets are self-correcting; and this is false because it's generally the intervention of the authorities that saves the markets when they get into trouble. Since 1980, we have had about five or six crises: the international banking crisis in 1982, the bankruptcy of Continental Illinois in 1984, and the failure of Long-Term Capital Management in 1998, to name only three.
Each time, it's the authorities that bail out the market, or organize companies to do so. So the regulators have precedents they should be aware of. But somehow this idea that markets tend to equilibrium and that deviations are random has gained acceptance and all of these fancy instruments for investment have been built on them.
There was a failure to recognize the misconceptions.by the authorities, the regulators—the Federal Reserve and the Treasury.They really failed to see what was happening..
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