Re: Is This So?
On Jul 5, 2006, at 6:32 PM, RE wrote:
What got my attention in Cockburn’s column was this:
“The Bank for International Settlements is no circus-tent Cassandra shrieking about the onrush of Doom. Bankers don’t shriek. But
here’s the BIS, trembling before its crystal ball and talking, in its most recent annual report, about “planning for the worst. Consider first a
discrete event which, if it occurred, would disrupt financial markets. What
might be done in advance to prepare for such an eventuality? One important
step would be to ensure the integrity of domestic lines of communication among
core financial firms, their supervisors, the central bank and the
operators of systemically critical parts of the financial infrastructure.
Another would be to ensure similar openness at the international level. Stress
testing is now almost universal in financial firms, which is highly desirable.
Yet stress tests are based on simplifying assumptions that necessarily
fail to match the complexity of real world events.” That’s a banker’s way
of saying, “The show could blow up tomorrow, and there may not be any way to
stop it.”Does this indicate an unusual level of concern on the part of the
BIS, or is Cockburn cherry picking their report?
They and the IMF have been writing stuff like this for years. And the
paraphrase is a little tendentious: things could blow up and we’d
better be prepared for extraordinary interventions. Which is exactly
what they did with the stock market crash in 1987, Mexican crisis in
1994, the Asian crisis in 1997, the Russian crisis in 1998, etc.
Doug