Wednesday, 27 May 2009

Delaying the day of reckoning

As usual Simon Johnson has a thought provoking piece entitled If the Crisis is over we wasted it

My sense is that to the extent that the crisis has been rationalized as episodic and the consensus view is that we're now back to business as usual, we will not have learned any important lessons or implemented the necessary changes.

Ultimately it may be better that a series of piecemeal and token changes have not been enacted as it has probably shortened the time frame up to the next crisis. When that does come it will require disruptive structural change and the emergence of a truly more transparent financial and political culture.

If one is a believer in the ultimate wisdom of markets, then one has to hope that they will eventually discover more rational pricing mechanisms for resource utilization and risk assessment based on a proper evaluation of external costs and unintended consequences.

This is the message that we should be paying attention to as we will (hopefully sooner rather than later) have to confront the continued degradation of the ecosystem, the dis-enchantment of electorates (which is approaching complete in countries like the UK), the conundrum of quantitative easing and the unsustainable nature of a private gain/public pain system of accountability.

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