Saturday, January 19, 2013

"Financial Collapse: A 10-Step Recovery Plan"

by Bill McBride on 1/19/2013 09:34:00 PM

Alan Blinder lists 10 financial commandments to remember - and starts by reminding us that "people do learn. The problem is that they forget — sometimes amazingly quickly."

The old Wall Street saying is "there is no institutional memory". Each new generation of Wall Street wizards figures out a new way to turn lead into gold, and to become wealthy while damaging the financial system.   Some of these wizards are probably perfecting their financial alchemy right now.

Maybe next time people will remember Blinder's 10 step plan, but I doubt it: Financial Collapse: A 10-Step Recovery Plan

1. Remember That People Forget
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2. Do Not Rely on Self-Regulation
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3. Honor Thy Shareholders
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4. Elevate Risk Management
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5. Use Less Leverage
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6. Keep It Simple, Stupid
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7. Standardize Derivatives and Trade Them on Exchanges
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8. Keep Things on the Balance Sheet
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9. Fix Perverse Compensation
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10. Watch Out for Consumers
Blinder concludes:
Mark Twain is said to have quipped that while history doesn’t repeat itself, it does rhyme. There will be financial crises in the future, and the next one won’t be a carbon copy of the last. Neither, however, will it be so different that these commandments won’t apply. Financial history does rhyme, but we’re already forgetting the meter.
All of these items are important, but I think the key is to watch for excessive speculation using leverage. One thing is certain, there will be another bubble ...

Earlier:
Schedule for Week of Jan 20th
Summary for Week Ending Jan 18th

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