Thursday, 12 November 2009

Do nothing

The most dangerous thing we could do to the global financial system is to go some way to reforming it.

Commentators are looking at what we have now - a manifestly unreformed system - and are crying out that if we don't do something a financial crisis along the lines of 2008 will happen again. However, whilst this wariness continues, the last thing that will happen is the same thing again, even the same sort of thing. People are expecting it, looking out for it and, at the first signs of it, will be all over it. Everyone is acutely aware of risk and exposures.

Moderate reform - on Walker Report lines - might be sufficient to persuade people to move on, to divert their attention, make them relax. But it would almost certainly be insufficient to rule out the possibility of a 2008-style financial crisis. This could well make a crisis more likely than it would be under current conditions.

The safest option would be to radically overhaul the global financial system - Glass-Steagall-type legislation, prohibitive capital allocations for risky trading activity, restrictions on derivatives, etc. - in order to make a 2008-style crisis impossible. However, the latter will prove politically and fiscally impossible.

So we have two just two realistic options: do a bit or do nothing. Better do nothing.

6 comments:

Peter Burnet said...

"Do Nothing!"

The perfect slogan for revolutionary times.

Gaw said...

With regard to pretty much any subject you care to mention, I can't think of any piece of advice less likely to be taken. Even if it is the best.

Peter Burnet said...

Couldn't agree more, Gaw. "The naysayer to 'Let us go down to the sea again, to the lonely sea and sky' need not propose a visit to MacDonald's instead."--William F Buckley Jr.

But this is why folks like us lose pretty much all of our battles. :-)

worm said...

doing nothing can be intensely machiavellian.





Or so I keep telling myself.

malty said...

Do nothing, except print money.

Brit said...

Yes, "Do nothing!" would be great on a placard. I'd wave it.

Reminds me of that Father Ted where they protest outside the cinema with their signs reading: "Down With This Sort of Thing!"
and
"Careful Now."