Every financial system fails in the end

Article Highlights

  • All complex financial systems fail given sufficient time.

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  • The greater the belief in a financial system's success grows, the higher the probability of its failure becomes.

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Sir, John Kay’s excellent article “The design failures that lead to financial explosions” (Comment, November 13) needs only one edit.

He writes: “The lesson for financial services is that the attempt to design a system for zero failure is impractical.” That should be changed to “is mission impossible”. All complex financial systems fail given sufficient time. The greater the belief in their success grows (see “the Great Moderation”), the higher the probability of their failure becomes.

Alex J Pollock, Resident Fellow, American Enterprise Institute, Washington DC, US

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Alex J.
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