The Connected Economy
Nat Torkington,
Oct 10, 2008
This is another one of those attempts to depict the current economic crisis as being caused by 'non-obvious connections' and 'complexity'. I disagree. The crisis was caused by a lack of regulation which resulted in an environment in which banks could bundle extremely risk loans (such as subprime mortgages) and represent them as trustworthy bank-backed paper. Now the banks don't trust each other because they realize that, as an industry, they have been dishonest. If it weren't for the innocent victims of the crash - which is to say, everyone else, with whose money the banks and financial companies were engaged in high-risk gambling - I would laughing my head off at the comeuppance. When governments (yes, governments) put the pieces back together, the financial system will be regulated, and essential industries - such as health, pensions, education and housing - will be taken out of their hands. If you want to draw a comparison with networks to explain the crash, don't point to complexity - point to things like spam and phishing and viruses and the rest.
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