Apr 18, 2008

Japan's credit lessons: act fast, expose all losses

Reuters quotes me in its analysis of Japan's lost decade.

According to Ellsberg paradox, people are afraid of uncertainty more than fixed loss. The uncertainty leads them to over-conservative investment, which decreases security prices, which magnifies uncertainty... So the first thing the central banks should do is to force banks to disclose all the loss as soon as possible. It's the most important lesson from Japan.

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