There must be something in the water: it cannot be denied he gets it right by linking to Haldane's paper, citing as follows:
A considerably more disturbing thought, though, was provoked by the Bank of England economists Andrew Haldane and Piergiorgio Alessandri. They noted in an influential paper delivered in Chicago in September that, in the UK at least, higher leverage fully – fully! – accounted for UK banks’ rise in returns on equity until 2007. This will plant a disturbing syllogism in the mind of the average voter: If (a) payment to bankers is based on returns, and if (b) returns in the past decade were due to increased leverage, then (c) bankers, when all is said and done, were being paid to increase risk – not to assess it expertly, just to increase it. In retrospect, the world might have been better off, and richer, if this work hadn’t been undertaken at all. The public may well assess the real value of the work done by investment bankers at zero.
No comments:
Post a Comment