[ExI] Greed + Incompetence + A Belief in Market Efficiency = Disaster

BillK pharos at gmail.com
Thu Jan 29 15:33:32 UTC 2009

GMO's quarterly update, by Jeremy Grantham has an enjoyable rant
blaming believers in the efficient market theory for the economy

The incredibly inaccurate efficient market theory was believed in
totality by many of our financial leaders, and believed in part by
almost all. It left our economic and governmental establishment
sitting by confidently, even as a lethally dangerous combination of
asset bubbles, lax controls, pernicious incentives, and wickedly
complicated instruments led to our current plight. "Surely none of
this could happen in a rational, efficient world," they seemed to be
thinking. And the absolutely worst aspect of this belief set was that
it led to a chronic underestimation of the dangers of asset bubbles
breaking – the very severe loss of perceived wealth and the stranded
debt that comes with a savage write-down of assets.

The believers in efficient 'free markets' as the answer to everything
seem to be having a hard time of it these days.


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