It has been 10 years since the day Lehman filed for bankruptcy. And it seems that we haven't learnt the lessons.
Last crisis was caused by debt and we have solved it by creating more debt. There can only be two reasons which can justify the current thinking that this time is different.
1) Regulations: For five years, I am in a role which helps me to closely understand the efficacy of regulations. While things definitely seem much better than the last time, it seems that market has found ways to game the regulations. Actually this would always be the case as the role of regulators should be to align the incentives rather than create distortions and then expect markets not to get tempted by creating barriers. This has never worked and this would never work.
Nice video explaining why barriers generally don't work. :)
https://www.youtube.com/watch?v=DZt4n3lh8lQ
2) Artificial Intelligence: This is something difficult to evaluate as it can potentially change the world. I am no expert in machine learning to tell how advanced we have become and I don't see any reason why eventually machine would not become as smart as humans. My suspicion is that market has overpriced the progress we have made on this avenue. Something similar happened before great depression and I don't think people who are betting their money on technology have much idea on technology itself. Although unlike the first point, this remains an 'if' and as a possible reason why my hypothesis could go wrong (as it has been for almost 7 years. :) )
Last crisis was caused by debt and we have solved it by creating more debt. There can only be two reasons which can justify the current thinking that this time is different.
1) Regulations: For five years, I am in a role which helps me to closely understand the efficacy of regulations. While things definitely seem much better than the last time, it seems that market has found ways to game the regulations. Actually this would always be the case as the role of regulators should be to align the incentives rather than create distortions and then expect markets not to get tempted by creating barriers. This has never worked and this would never work.
Nice video explaining why barriers generally don't work. :)
https://www.youtube.com/watch?v=DZt4n3lh8lQ
2) Artificial Intelligence: This is something difficult to evaluate as it can potentially change the world. I am no expert in machine learning to tell how advanced we have become and I don't see any reason why eventually machine would not become as smart as humans. My suspicion is that market has overpriced the progress we have made on this avenue. Something similar happened before great depression and I don't think people who are betting their money on technology have much idea on technology itself. Although unlike the first point, this remains an 'if' and as a possible reason why my hypothesis could go wrong (as it has been for almost 7 years. :) )
