Part of the thesis sounds perfectly sensible. When finance people introduced the concept of portfolio insurance, investors believed they had a risk-free playground. Credit default swaps offer the same kind of false security. With that false security, investors are free to do stupid things as long as someone else foots the bill. The idea that this market for false security is productive seems to have been disproven by reality.
On Sat, May 19, 2012 at 8:09 AM, Lakshmi Rhone <[email protected]> wrote: > At his blog, Tyler Cowen writes: > > > Edward Conard, author of Unintended Consequences: Why Everything You’ve Been > Told About the Economy is Wrong, offers a hypothesis. He suggests the > underlying cause is the (relatively recent) prevalence of risk-averse > foreign capital: > -- Michael Perelman Economics Department California State University Chico, CA 95929 530 898 5321 fax 530 898 5901 http://michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
