John Kay, but then what are those who endorse or cover up for the fools and hedgehogs who claim to know the future?

Sir, John Kay writes “Only fools and hedgehogs claim to know the future of complexity” January 2. And I must ask: Do you know some who, with their capital requirements based on perceived risk, have claimed to know the future of complexity more than the bank regulators and their clairvoyants the credit rating agencies? I do not! 

These fools not only believed they could control the future without distorting it but they also entirely forgot that the risk in banking has absolutely nothing to do with the risk-perceptions being correct, and all to do with these being incorrect. If the regulators had only taken note of the empirical realities of all bank crises, they would have set the capital requirements for banks higher for what was perceived as “absolutely not risky” than for what was perceived as “risky”. 

But what does then all that make of all those who without protesting allow these fools and hedgehogs to keep on regulating the banks using the same faulty paradigms? Since FT has not wanted to echo my arguments about the distortions produced by bank regulations, FT is actually one of those endorsing or covering up for the fools and hedgehogs in the Basel Committee and the Financial Stability Board. 

That a “Black Swan” is to be blamed for the disaster? Forget it! This was all an entirely predictable and manmade disaster.