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« Steven Kates, ed., Macroeconomics and Its Failings | Main | White Says Macroeconomics is Off Track »

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From one Peter to another, I thank you. Waiting now for the comments from Lewin, Leeson, etc.

It is time for a serious discussion on the extent to which a model of free markets is applicable. It is certainly not in finance and banking, where corporatism has taken hold. Healthcare? The auto industry? The rating agencies? Dare I ask, the universities?

Measuring in such a gross manner doesn't give a clear picture in this case. It was in great part that the two parties in a contract had the ability to lie, and that there wasn't recourse in the legal system or third party oversight when fraud was commited or during the act of commiting the fraud. The correction of the fraud was the bursting of the bubble. Even Greenspan admitted that the market didn't correct for fraud in the CDO/CDS case. So it is a case of wrong regulation not of simply regulation.

The Buttonwood column in the Jan. 30 issue of The Economist has a good article on "the unintended consequences of past financial reforms," including the Basel rules. It asks what are the unintended consequences of proposed financial reforms?

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