The Time of Money in Financing and Society
Chapter 11: The Crisis – Presuppositions
11. The crisis – presuppositions In this third part, we shall deal with the financial crisis of 2008. We shall do so with regard to the following three questions. Was the crisis avoidable? How did it develop? What can we do now? If, as we have seen, theories and techniques about financial markets are based on faulty or, at least, overly simplified assumptions, and risk management produces uncontrolled risks, was a crisis bound to arrive sooner or later? If one were to have asked for a forecast, one’s question would have been meaningless, given the impossibility of an answer because the future is always open. However, at an ex-post reconstruction, one can see the correlations between a certain (past) vision of the future and the (today present) future which actually came about. The uncontrolled increase in risks began with a new trade in safety, the buying and selling of guarantees for the future. This was connected with the impression of being able to govern the risks of tomorrow in the present (section 1). How did the future escape this control? What mistakes were made? One of the reasons for the crisis was the change in the conception and management of risk (section 2). The development of techniques for risk assessment for those granting loans, which allowed them to calculate the possibilities of delays and defaults, to foresee these and compensate for them with one another, and to promise the creditor that they would achieve a profit regardless of how things went,...
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