Richard Feynman has claimed that “it is safe to say that nobody really understands quantum mechanics.” He was serious about it because of the complexity of the subject and the counter-intuitive consequences of the theory. Sometime I think that the global financial system is also beyond comprehension. But that is not quite true. Unlike quantum mechanics, the financial system is an artifact, albeit a very complex one. Also, it is possible to understand something and yet be unable to fully control it all the time. Once in a while, it can crash. When–not if–it does crash, you figure out what broke, fix it so that it does not break again, and get on with life. It will break again later due to a different bug but it will never be entirely bug free.
As I am an economist, I am supposed to understand the financial system. Luckily, I am not that sort of economist and so I don’t feel the slightest embarrassment admitting that I don’t have much of a clue. But sometimes I think that perhaps not too many people — even those whose business it is — have a clue either. Some suspect that even the chairman of the Fed, Ben Bernanke, too is not fully clued in. Go figure.
Anyway, I wrote a piece on the meltdown of the US financial system for MailToday. Why? Because everyone and his brother is writing one. So why not I? It will be in the papers tomorrow. But you, dear reader, get to read it today!
Continue reading “On the US Financial Crisis”