17 January 2008

the music goes round and round

Two or so decades of liberalisation and deregulation at national and international levels created the environment for ever more complex financing models, derivatives, hedge funds and the several thousand others that I can't name.

So when, eventually, something goes a little pear-shaped, or a lot, no-one really knows how to fix it because it's a complex, living system beyond rational comprehension.

Anyway, I know bugger-all about it so that's how it appears to me.

For once I'll forgo the soapbox, but surely there would be some value in a little backroom/skunk works effort between consenting countries to start to get some governance in place that is obvious to the partially interested bystander, rather than what I imagine happens now, which is taxpayer-funded jaunts to tax havens (sorry, international financing centres) to discuss not much at all.

There's an awful lot of short term profits being made and there is presumably a measure of economic/industry activity, both public and private, that gets done purely because these arcane financial instruments exist.

You've got banks or non-bank lenders in the US making home loans to people who blind freddy can see will never be able to repay, even as the value of their homes goes into freefall. Then try to imagine what's going on in the commercial rather than domestic lending market, where the complexity is exponentially greater, not to mention the actual sums at stake.

So who pays the piper? Not to mention the ferryman?

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