ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Monday, April 14, 2008

 

a demon of our own design


via garden rant, new scientist on why we're nearing the end -- a combination of hypercomplexity and hyperconectedness.

Interestingly enough, New Scientist cites the subprime mortgage crisis--I wrote here about the weird connections it was revealing--as a prime example of sheep-lopping. Instead of spreading the risk in the sense of dividing it up and minimizing it, our financial system is now so tightly wound that it spreads risk like a contagion--and if one segment of the American mortgage market gets sick, there is a worldwide credit crunch.


richard bookstaber makes this observation at length in his excellent systemic view of financialization. (his erstwhile blog here.) bookstaber recommends climbing off the ledge through regulation, but a part of me wonders if such tightly coupled specialization isn't an inevitable outgrowth of systemic behavior which makes crisis and collapse similarly unavoidable, in civilizations the same as markets.

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