Wednesday, April 7, 2010
Three things for sure...1. Economists are bad forecasters 2. Financial innovation will ALWAYS outpace regulation and 3. It is going to hapen again.
Greg Mankiw is always worth listening to. I like this idea of making financial firms buy contingent debt. I also like the idea of a "fire wall" for financial firms based on their charter. If you are inside the fire wall you are protected and boy are you going to pay for that insurance and should. If you are outside it, you are on your own. Then watch the market price their debt and leverage. But as sure as the sun rises tomorrow, financial markets are always going to be 3 steps ahead of regulators and another bubble is going to come along sooner or later. Then the mess we are in now will happen again....unless we take the right actions now. And we are not taking the right actions with what I have seen from proposed Senate legislation.
"Prediction is a difficult thing, especially when it has to do with the future."