To insulate us from realities? Thanks but no thanks!

Sir John Kay writes “Why more regulation will not save us from the next crisis” March 26, and though he is absolutely right I do not make the same inferences that he does. Just for a starter, I believe that if we do not have a next crisis, that could just the same be the symptom of that we are not doing enough… getting out of bed has its risks, but staying in bed leads you nowhere.

Also, when Kay argues that we should “insulate the real economy from the consequences of financial stability” and meaning with it that the governments should “protect small depositors” (how are they identified?) and mentions “to restrict the use of retail deposits as collaterals for speculative activities” he is in fact proposing something like forcing us to invest exclusively in government papers… and as if that carried no risk to us.

We do know about many different efforts going on in trying to create absolutely risk free environments for retail deposits and that is not only arrogant and preposterously silly but also quite dangerous… much like the belief that the credit rating agencies could be imposed as official risk surveyors without themselves tuning into a huge systemic risk.