The 12 discarded myths of our times

1. Systemic risk disappears if capital markets are sufficiently large and efficient

2. Leveraged betting and other financial innovations are uniformly good and create no systemic disadvantages or vulnerabilities

3. Most countries can continue to manipulate their currencies; the consequence may be minor advantages/ disadvantages relative to other countries, but there are no systemic consequences

4. Sub-prime housing is a marginal issue and, in any case, losses will be limited

5. In any case, interest rate cuts will certainly deal with any possible resulting system-wide issues

6. Central banks are on top of inflation and there is no foreseeable reason to imagine that they will not be able to continue doing so

7. Growing stability in emerging markets will make the IMF more and more marginal, or even redundant

8. Even if there is a problem in emerging markets at any time, these are tiny and the global system can cope without any problem

9. The less regulatory supervision there is, the better - we don't even need to register deals worth billions

10. There is no reason for the public, governments or any other authorities to interfere with the structure, process and results regarding incentives by companies

11. Company-level risk-management is all that we need; if we look after this level, then global or systemic risk will look after itself.

12. Large bubbles (e.g. in commodities, oil or housing) or large borrowing flows (current account deficits, term mismatches) are not indicators of systemic risk – and, in any case, we can’t do anything about them. Sphere: Related Content