Ongoing Conceptual Crisis

The Financial Times was the first of the big business newspapers, back in August of 2007, to point out the real root of the financial crisis, which was and is that a huge proportion of the securities everyone was buying and selling cannot be priced. Value unknown. Value zero. Value= what the sucker will pay. Suckers everywhere have gone broke or gone home.

So note today's FT coverage for the financial equivalent of the cigarette warning label that has become routine:

The affair has called into question the business model of funds of hedge funds – which run about $685bn in assets – after many of the biggest failed to spot warning signs.

Cleanups require sorting wheat from straw, sheep from goats - all farmyard metaphors are alike to me . . In our current case, the pros can't tell them apart. Worse, the two kinds of assets trade places all the time, and depend on confidence for their stability - on faith in the story being told. Financial sheep are turning into goats, while governments try to pay investors to see their goats as sheep.

It's a great way to run an economy.