Saturday, 14 March 2009

Reckless humanity - Risk taking on an epic scale.

  • As long as there is an implicit public backstop to prevent systemic failure, a privately financed banking sector can be relied upon to seek out the tipping point.

  • Because of the non-linear dynamics that underlie a financial system built on infinite notional capital (i.e. borrowed from future generations), high leverage and risk management models where market liquidity is taken as a given, the real moral hazard is that there are no reliable financial metrics to estimate where that tipping point lies.

  • Not only are policy makers unable to tell when the tipping point is likely to be reached but they have no way to quantify the magnitude of the backstop requirements.

    This is risk taking on an epic scale.

  • But to put into an even broader context, such risk taking is dwarfed by comparison with the ongoing endemic failure to accurately account and pay for the true costs of resource exploitation on a planet on which life itself may be in jeopardy in the not too distant future.

    You have to admit that human beings are awfully reckless.

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