It is rather interesting that a couple little books came out in 2001 and 2004 that turned all conventional risk models Wall Street were using on their head. Unfortunately no one read them. At least no one interested in believing that their methods of risk analysis may be wrong even though they had failed Wall Street time and time again.
It’s refreshing to a level of analysis that doesn’t blame the financial crisis on a sudden onset of greed. Any serious analysis must conclude that it was the Fed’s interest rate policy that was the root cause, exacerbated by government housing policy (Washington) and faulty risk management models (Wall Street). Human nature is a constant and our problems are not the result of “wombat spirits” (or animal spirits generally).
As Jeff says:
Money flows into opportunity and a lot of money, a lot of easy money, will mask risk with rising prices and cause malinvestment.