This morning's financial pages have me mulling over two dimensions of the current economic mess:
What is fascinating about the current crisis in the money/housing markets is that financial people by the 1990s thought they had mastered risk -- for example, by slicing and dicing it into collaterized debt obligations and the like -- only to discover that they had done their work too well. They spread risks so broadly that no one knows for sure where they are anymore and now everyone is potentially at risk. So what's that about? The ineffable resilience of capitalism?
Occasionally, however, events force us to notice them and to confront the reality that oligopoly-building to reduce competition has generated a variety of new risks. Consider the recent financial turmoils: suddenly everybody knows that there are only a handful of big auditing firms, or that only two bond insurance companies carry on most of the business (the big new concern in the financial pages). Success in reducing competition to a handful firms in these lines of business has made large segments of American business dependent on their health, in effect increasing risk for everyone else. The ineffable resilience of capitalism?