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Oct 22 2009 ∞
“ We must not get diverted by the financial sector’s opposition or by populist rage. We must focus, instead, on the core issue. Trying to make financial systems safer has made them more perilous. Today, as a result, neither market discipline nor regulation is effective. There is a danger, therefore, that this rescue will lead to still greater risk-taking and an even worse crisis at some point in the not too distant future. Either we impose a credible threat of bankruptcy, or institutions we have to support are made safer, or, better, we have both of these. Open-ended insurance of weakly regulated institutions that take complex gambles is intolerable. We dare not return to business as usual. It is as simple – and brutal – as that.
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FT.com / Columnists / Martin Wolf - How to manage the gigantic financial cuckoo in our nest

Sawickipedia: Martin Wolf is one of the best financial commentators on the planet.  Everyone interested in finance and economics should read his columns.  To his point - the threat of bankruptcy - the threat of failure must be real as failure is a very powerful organizational and personal motivator.  That’s where socialism and crony capitalism fail - they remove the risk of failing which either allows you to make insane risks because you aren’t worried about not being bailed out or you become so insular because success is “guaranteed” sort of like social promotion in schools.  Bankruptcy is good.  Creative Destruction is good.  Failure is ok.
(via sawickipedia)

Rafer sez:
This is a restatement of Too Big to Fail/Survive, with an attempt to swap cause and effect of anti-scaling regulation/bailouts. His restatement is unfortunately just another diversion.

(via rafer)

Sawickipedia: @Rafer you have it backwards Wolf is extolling against too big to fail.  His point, and my agreement, is that all businesses need to face the realities of bankruptcy - big, small and otherwise.  It was the unstated expectation of bailouts that helped caused the mess we’re in.  Wolf is far, far from being in the too big to fail camp.

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