Monday, February 4, 2013

Only consistence can create a dangerous systemic risk, inconsistency does not!

Silly, silly, silly! Here the regulators once again enter into an exercise of futile navel gazing. Why should regulators be concerned with whether the risk weighting of assets is consistent or not? 

Their problem is not if any risk-weighing is correct, or consistent, their problem is when the risk-weighing is incorrect and what to do about the consequences. 

Let us instead pray for tremendous amounts of inconsistency since that is the only thing that can save us from building up a systemic risk that will bring all the banks down, simultaneously.

A free market is not made up by consistencies, but by millions of inconsistencies!