Bubble and Bust Bound to Continue
Letter to the Editor

Sir, Thanks for Tony Jackson's column "Don't believe bubbles have been scientifically abolished" (August 10). Of course, he's right that bubbles have not been (and cannot be) abolished. He's right to point out the naive faith many politicians have in regulation. He's right that faith in "corporate governance" by fund managers is equally naive. Not only do fund managers have no "special wisdom" but they are themselves hired agents, not stockholders--indeed, agents who promoted notorious stock buy-backs in the name of "shareholder value", and thereby decapitalised banks. He might have added to the list naive faiths in accounting or credit ratings or economic forecasts.

What Mr Jackson misses is the real problem, which is that of knowledge--or rather the inescapable lack of knowledge--of the future. Since no banker, or regulator, or politician, or fund manager, or rating agency, or accountant, or economist can know the future, the long historical series of financial mistakes called bubbles and busts is bound to continue.

Alex J. Pollock is a resident fellow at AEI.

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About the Author

 

Alex J.
Pollock
  • Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.


    Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.


    The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.


    He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.


  • Phone: 202.862.7190
    Email: apollock@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: (202) 419-5212
    Email: emily.rapp@aei.org

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