Systemic risk is mitigated when individual firms mitigate their own risks. It is not mitigated when those risks are centralized in a few large firms with a government backup. That creates systemic risk. Decentralization and risk-avoidance mitigate systemic risk. Both of those are encouraged in money, capital, and banking markets not controlled and regulated by the federal government and the FED. FULL ARTICLE
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3 comments ↓
What all these bailouts are doing is actually encouraging more wasted and more bad business. let these idiots go under, and we can put our money to use somewhere more productive!
While i agree with the Author’s take on this…and yes systemic risk in some peoples eyes is far different than ” managed risk”. Even with some over all regulation or the one’s that were done away with during the elder Bush and then into the Clinton years were restored and put back into place. there are people in and within the system that would find wiggle room and ways to get around them…Still looks like greed is still trying to keep it’s ugly head way above the water to more than survive…Gee And Senator Dodd still can’t say with a straight face that he lied to the American people…i wonder if Barney frank would try “Plausabel Deniability” card as well ?? Do you think ?
Steve, great explanation of how regulation actually doesn’t work – and when it does, it works for the benefit of the politically connected at the expense of everyone else.
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