I've been reading, "In an Uncertain World: Tough Choices from Wall St. to Washington" by Robert Rubin, the former Secretary of the Treasury under the Clinton administration. Interesting reading. I like Rubin as he seems to have the same hang up about the Democratic party politics that I have, mainly that all their programs sound wonderful but they seem to have no concept about how they are going to pay for them.

It's also an excellent read from the standpoint of crisis management as it provides a 1,000 foot view of economic policy and the concept of network effects on market movements. Basically, a lot of the problems that the NEC (National Economic Council) and the Treasury had to deal with were caused by a poor assessment of downside risk, leading to "contagion" and a stampede mentality when things got bad, which led to further problems, dragging more parties into the mess, which in turn made more people nervous, which caused even further problems.

This domino-effect is something I've been thinking about a lot lately. The "run on the banks" is still a valid concern for many companies. When creditors get nervous and start calling their loans back they have the potential to create a self-fulfilling prophecy. Even companies that may otherwise appear stable may be in danger of insolvency if the market conditions turn sharp enough for long enough.

11:45:59 AM  #