Nothing should become too big to fail
In what now feels like waaaay back in the summer of 2007 I read Nassim Nicholas Talebs books Fooled by Randomness och The Black Swan. Given the meltdown of the global financial system since, Nassim's 10 Ten principles for a Black Swan-proof world published in the Financial Times is a good read when looking forward to a new regulatory system. Click through to read the entire piece, three of the principles below.
1. What is fragile should break early while it is still small. Nothing should ever become too big to fail.
2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing.
5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.