Hey, Alan Ramsey did us a favour last weekend by printing something I had missed earlier. Ken Henry (head of Treasury) had this to say at his Press Club lunch during the week:
It's the first bit about the complexity reaching a level that no one can understand that is the most interesting."The array of financial instruments deployed within the global financial system has become so complex that it defies understanding. It's not just that nobody, no one person, understands the whole system. That would be hardly surprising. What is worrying is the very large number of senior finance sector executives who don't appear to understand the consequences of even their own decisions, of their own actions.
"The second dimension is closely related.
"It has to do with risk, it has to do with uncertainty. Complex financial instruments have been traded globally in ways that were thought to provide a more comfortable sharing of risk across the world. Instead, what they've shared is fear. People now not only don't know who they can trust, they don't even know who they need to be able to trust.
"And the third dimension I want to identify is the role played by regulation and, more broadly, the role played by governance systems. For decades to come, policy makers around the world are going to be asking why those with sufficient authority didn't, at some point, stand above the buzz of the financial markets and declare, in simple language, that all of this simply doesn't make sense."
I mean, how do you judge exactly when that has happened? Which world famous economist is going to be the first to admit that he can't understand it all?