“The problem we are dealing with here is not inherent in financial innovation. It is inherent in financial regulation. Private sector models of risk management were undoubtedly imperfect, as the financial crisis made clear. But public sector models of risk management were next to non-existent. Because legislators and regulators acted with an almost complete disregard for the law of unintended consequences, they inadvertently helped to inflate a real estate bubble in countries all over the developed world.”

“Today, it seems to me, the balance of opinion favours complexity over simplicity; rules over discretion; codes of compliance over individual and corporate responsibility. I believe this approach is based on a flawed understanding of how financial markets work. It puts me in mind of the great Viennese satirist Karl Kraus’s famous quip about psychoanalysis: that it was the disease of which it pretended to be the cure. I believe excessively complex regulation is the disease of which it pretends to be the cure.”

Excerpt From: Ferguson, Niall. “The Great Degeneration.” Penguin Group, USA, 2013-05-15. iBooks.

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HKO

If the critical problem is much more than greed and capitalism- if it is in fact complex tightly coupled systems- then 3,000 page regulations loaded with yet to be determined rules and studies will only make the problem worse.  In an uncertain evolving system small failures are much preferred to fewer larger failures.  It reminds me of the famous Pogo cartoon exclamation- “we have met the enemy and he is us”

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