MHodak:
> Only a people as ignorant of history as they are of economics can consider the current boom-bust cycle a failure of laissez-faire.
I wouldn't express it this strenuously, but it is difficult to argue with.
[but, be aware: if boom-bust cycles cannot confute laissez-faire markets, then, equivalently, boom-bust cycles cannot confute market regulation. If market regulation does not stop boom-bust cycles, but meets other social goals, then regulation is working as _designed_, if perhaps regulation is not working as it is being _sold_ to the voters.]
I appreciate being on this side of the financial bubble. I now know the hard limitations of many financial innovations:
* cheap cheap cheap lending as social policy
* credit default swaps
* mortgage securitization, or other alchemy used to turn shit into gold
* more alchemy: thinking that deregulation and/or regulation can turn shit into gold
* swapping really existing heavy tails with negligible light tails in modeling, for ease of modeling
* borrowing to invest, which was always speculation and always will be speculation, begin tarted up as "savvy leverage"
* hand-waving away concerns about alleged "systems of trust" that only reward for short-time-horizon goals
* relying on rating agencies in the pocket of those being rated
* not treating liquidity as a scare resource (in reality, you should force people to pay dearly for liquidity *now* as opposed to liquidity later); thinking that you can pull liquidity out of your ass
* in general, trying to profit from financial instruments that *you* don't personally understand
I didn't have the chops to puzzle out all these myself, and now I don't have to. I am standing on the far side of the bubble.
I am weathering this current storm, not badly, not because of my smarts, but because my father and wife are fanatically risk-adverse, and I don't have enough energy to take them both on simultaneously. So I am in a position to profit from lessons I am unworthy to have granted to me.