Over the last couple of weeks I have been reading ‘The Upside of Down‘, authored by Thomas Homer-Dixon. Its not often that a book makes an impact on how I think about things, but this book did. Generally I think of myself as a pragmatist, and no I have not suddenly joined the Al Gore fan club.
Thomas carefully develops the case that there are some seismic changes occurring in the world (meaning the whole world) that when they occur simultaneously will produce cataclysmic change in the world. My intention is not to rationalise the book … you can do that if you wish.
What struck me, and is relevant to Banks, is the powerful argument, centred in chapter 8, that the current financial markets are failing. Homer-Dixon refers to comments from George Soros, arguably the ultimate capitalist [emphasis mine]:
Capitalist societies are locked into their own self-referential, self- validating beliefs – a situation that makes them less flexible and more vulnerable to breakdown
This blog is not about to become a literary critic. When I read this, I had to think of the sub prime crisis. No-one who was part of the market can honestly say then saw that coming. A run on a British Bank, a French Bank freezing their investment funds, the entire Canadian Banking system placing a freeze (that expires today, Oct 15th) on all interbank commercial paper transactions.
So yes, there is something wrong with the current financial market system, that is run on a basis on supposed mathematical precision, and purity, yet that has completely ignored the human element, which is quite emotional, irrational, and the antithesis of mathematical.
Expect more fun over the next 18 months, and competition from the most unexpected sources.
Bankwatch 
I haven’t read Mr. Dixon’s book, so my comment is based only the snippet of text you included, but…wouldn’t that statement be true of pretty much any organized movement? Capitalism, communism, socialism, established industries, political parties, American Idol contestants…
God please let this be true of all Idol shows!
@Dan … in fairness to the book its hard to get the quote in context. In any event, his theory is predicated on the dominant systems that exist in the world today, and those happen to be capitalist. What I found interesting was the persuasive argument [that I will leave to the book] that capital markets are not efficient, as people generally assume they are.
Well…I think the only people who still regard capital markets as highly efficient are from the Chicago School of Business. 🙂
As I said over our last beer, what you’re saying isn’t that different than the financial aspects of Naomi Klein’s new book.
I’m with Dan. “Self-referential, self- validating beliefs” is generally a description of any movement, even religion. I read that quote and immediately thought of all the Net Promoter Score advocates out there. Self-referential, self-validating beliefs? Oh yeah.
p.s. Colin: Spend a little time here in the US — especially with conservative-minded people — and you might not be so likely to refer to Soros as the “ultimate capitalist”.