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April 4, 2008
Soros: The false belief at the heart of the financial turmoil
By
For the past 25 years or so the financial authorities and institutions they regulate have been guided by market fundamentalism: the belief that markets tend towards equilibrium and that deviations from it occur in a random manner. All the innovations - risk management, trading techniques, the alphabet soup of derivatives and synthetic financial instruments - were based on that belief. Regulators ought to have known better.
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For the past 25 years or so the financial authorities and institutions they regulate have been guided by market fundamentalism: the belief that markets tend towards equilibrium and that deviations from it occur in a random manner. All the innovations - risk management, trading techniques, the alphabet soup of derivatives and synthetic financial instruments - were based on that belief. Regulators ought to have known better.