This time though ignorance was mostly fabricated

Sir John Kay in “The same old folly starts a new spiral of risk” August 14 recounts a story from the files of Lloyd’s to make a case for how “people who knows a little of what they are doing pass risks to people who knows less” and so therefore risks tend not to spread but to concentrate setting us up for an explosion. I agree that we might or should have already learned our lessons from that but in the current turmoil there are in fact two new elements that give a fresh perspective on financial history. The first, the most ironic, seems to be that it was in fact those most knowledgeable participants that with their excessive arrogance fabricated with their sophisticated financial models their own ignorance and second, more tragic, that the market was not allowed to apply its own and perhaps even more wise ignorance, but was instructed, by the regulators, to follow the advice of the experts, the credit rating agencies. The concentration of risks under such circumstances could prove to be even much more explosive.