It is in the Basel-Consensus that the fault lies!
Forget debating about a Washington Consensus turned sort of irrelevant when it is the Basel Consensus that is really breaking into pieces.
If you set up a system that is composed of a.- minimum capital requirements for banks that are based on risk; b.- the empowerment of few agencies to measure the risks; and c.- the need to immediately respond and mark to market the consequences of any change in the perception of the risks, then you have gathered up the necessary and sufficient elements to guarantee that, sooner or later, you will suffer a financial tsunami, along the lines of that one we are currently seeing.
If you set up a system that is composed of a.- minimum capital requirements for banks that are based on risk; b.- the empowerment of few agencies to measure the risks; and c.- the need to immediately respond and mark to market the consequences of any change in the perception of the risks, then you have gathered up the necessary and sufficient elements to guarantee that, sooner or later, you will suffer a financial tsunami, along the lines of that one we are currently seeing.
Posts
