Timely accurate information is good, but you’ve got to keep markets guessing too.

Sir, I refer to Philip Augar’s “For markets there is such a thing as too much information” February 2.

Indeed it is a very difficult topic. Even if you want markets to have information, you also need for markets to be guessing in order the keep them on their toes and in form. A market with perfect and timely information could soon lose some of its strength. Its analytical capacity would be much less appreciated and everything would tend to be boringly perfectly priced.

Closely related to this in 2007 I wrote “The dark side of knowledge”. In it I held that too much timely information could chip away at what good is often derived from blissful ignorance.

Also if you report on problems too soon, there will be less time available to correct these, and the curtain might be brought down much too early.

If knowledge suffices then wisdom is worthless

Don’t blame Basel II, it’s Basel I that got us here!

Sir, you are publishing many letters, like for instance on February 4, that blame Basel II for our current financial turmoil. Not true. The genesis of it all lies squarely with the original Basel Accord and its first implementation, Basel I. That is when our regulators decided to enforce a system of minimum capital requirements on the banks and to empower the bureaucrats of the credit rating agencies as their outsourced risk surveyors.

The whole Basel affair is just another example of the dictatorship of information and knowledge that places all the decision in hands of specialists whom in this case, with the usual arrogance of specialists, thought they could control risk and completely ignored that there is nothing as risky as the risk you believe you have under control.

What do we learn from this all? The same old lesson! Listen to the experts but do not, under any circumstances, give them power to control it all, as that will, by virtue of incestuous degeneration, put in force uncontrollable and very dangerous forces.

If knowledge suffices then wisdom is worthless

If knowledge suffices then wisdom is worthless and sure enough our bank regulators placed more value on knowledge than on wisdom; which is the only way how you can explain such foolish behaviour as empowering the credit rating agencies with so much power over the financial flows of the world.

See where this has gotten us. All the very sub-prime awarded mortgages to borrowers that classified as subprime would have not been able to go anywhere had they not been blessed as prime collaterals for other securities.

One reason that stops the world from realizing the foolishness of it all is that the credit rating agencies are private, and we have all been pavloved into establishing a connection between private and free efficient markets. The truth though is that the private credit rating professionals are only outsourced bureaucrats working for some pompous Ministry of Financial Risk Elimination.