Less Trust = Simpler Financial System
“The more complex the transaction, the more trust is needed to sustain the transaction.”
–Robert Shiller, “Animal Spirits Depend on Trust“; The Wall Street Journal (1/27/2009)
Robert Shiller, the Yale economist who made his name calling the 2000 Stock Market Bubble, has an excellent piece in Tuesday’s Wall Street Journal explaining where the financial system is right now, and exactly how it got there.
In an era when trust has been shattered, securitization and derivatives are out, “plain vanilla” debt and credit — and a lot less of them — are in.