Good News About the Financial Crisis

From Zanecorpwiki

Following the housing collapse and subsequent economic troubles, one hears a lot about complex, synthetic instruments which even experts--even the people that dreamed them up and wrote the disclosure docs--can't seem to understand. The way they behave and interact is somehow to complex and subtle to grasp.

At first, I thought these were lead ins to the guy that would just lay out all out. It was baffling to realize that's where the narrative ends.

My confusion lay in the fact that we not only have a good understanding of what theses things are and how they work: we have a perfect understanding. I grant this sounds counter-intuitive, but it is actually quite easy to see once you know where to look: at the payment processing systems. Everyone that bought into these exotic instruments gets a check (or not) based on the rules specified in the disclosures. Yes, these rules are complex and impossible for humans to deal with straight on, but they are perfectly captured in the computer code of the payment processing system. If it were not so, then you'd have to believe that investor payouts are at least partially, literally random... and I haven't heard anyone suggest that.

I happen to know something about these systems, and I trust that inaccuracies are few, relatively benign, and immanently fixable.

There are plenty of practical obstacles in the way of putting that embedded knowledge to good use. However, the pieces are certainly all there and we even have a good idea of how to put them together. This is essentially what successful brokerage houses and investors do. There's no magic to it. Given the right access, you have to be particularly smart or clever to succeed.

Getting access, or being a bit more clever about how one fits things together can be very profitable, and that's all well and good. When a broker uses their advantage of understanding to profit, the market benefits. They create positive harmonies in the market.

The bad news is there are two ways to gain relative advantage: get smarter, or make everyone else dumber. When a broker uses their advantages to sow confusion, the market suffers. At worst, such brokers go from discordant to destructive.

There is certainly a problem of greed and reasons to suspect ill of "human nature" in all this, but the good news is that the discordant tones tend to originate above the level of the individual. I wager most sincerely believe that they are doing a good and right thing (and I'd give good odds to.) The individuals themselves have either placed too much trust in the wrong system or have themselves become so far removed by wealth and isolation as to be essentially deaf to the cacophony around them.

So we know what needs to be done, and we know it can be done. We know what the obstacles are, and we know how to get around them. I suppose this idea could either make one hopeful or bring on an even deeper despair. The key is a vigorous patience which meets setbacks head on, and slowly, surely trudges along.