Thursday, March 15, 2012

My letter to the Financial Times re: Regulatory Hubris

Subject: Regulatory Hubris
Date: Thu, 15 Mar 2012 06:20:31 -0400

Re: Shadow banking "threatens stability"
Dear Sirs:
In his recent address to the Cass Business School in London, Lord Turner advances the preposterous claim that his army of regulators have the ability to decide what is and what is not a safe and sound investment. This is the height of hubris borne of a complete lack of understanding of financial markets. No one knows what is a safe and sound investment. This is determined ONLY by the market discovery process, which works ONLY when the participants have their own property and livelihoods at risk. Those investors and their advisors who are successful become wealthy, because they have added to the wealth of society through their insight. They are rewarded with more assets to manage and control. Those investors and their advisors who squander wealth will not be entrusted with more. Regulators risk neither their own wealth or their professional livelihoods and, thusly, are not subject to the discipline of the market. Thusly, they CANNOT engage in the kind of disciplined calculation that is necessary for markets to flourish.

Patrick Barron

1 comment:

  1. This is the constant theme of technocrats who believe that they enjoy superior intellectual, social, economic status and/or understanding. .
    They truly believe that they are entailed to leadership roles because of their “relevant skills and proven performance”.
    They claim their decisions are based methodology rather than opinion, or I might add, any practical experience. Only they know what is best. Only they know what will work. They are the only people capable of making decisions; the only problem is that they are usually WRONG.
    Theocracies are not democracies, the real power is shifted from the elected representatives, and therefore from the people, to unelected, unresponsive, and unanswerable, bureaucrats or technocrats.
    If only YOU were more intelligent, you would see that THEY are correct, ergo and to wit, if you don’t agreed with US (the smartest people in the room…any room) you must be, at best ignorant, and at worst stupid.