More legends of finance

Writing about the financial wizards who misallocated hundreds of billions of dollars into an inflated housing market—- makes me think of something James Galbraith’s wrote in his book The Predator State.

“The same problem was apparent at the end of the internet boom… .  Shortly thereafter it emerged that capital markets had financed 50 times the optical fiber cable that was actually required, a record that would have embarrassed a Hungarian central planner of the 1950s.”

Galbraith makes the general case that financial markets are completely incapable of policing corporate activity in many situations like energy markets, or large, complex organizations like Worldcom, Tyco, Enron and others.  It kind of looks like he might be right.

Advertisements

Leave a comment

Filed under economics

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s