Deja Vu, Insanity and Caddyshack

It seems that we are in something of a Groundhog Day situation. Once again we are watching a major loss of confidence in the world economy as a result of a major "unexpected" (?) banking loss (ie 2bn - and possibly more - at JPMorgan) and all the renewed speculation of Greece (and maybe other countries) falling out of the Euro as a result of the recent elections, failure to uphold previously agreed arrangements and an impending default.

There seems to be considerable resentment within Greece that their politicians are putting personal interests against the national interest. We can see elements of unrest in France and Germany too..

This all seems to be a recurring situation that has happened in similar shape a number of times over the last few years.

Depending who you listen to or what you read there is a definition of insanity as depicted above. Some say it is Chinese, others attribute it to Einstein. Either way is a certainly worth heeding. Our politicians and regulators appear to be insane.

This is all despite increasing and almost strangling regulation on banks and detailed rules for Euro governments. These seem to ignore or at least ride rough shod over common sense and good judgement. The intent is good and there are those that believe that by regulating more and more one reduces risk, but sadly it doesn't work that way.

In another field, the Theory of Constraint, the foundation is that there is always a limiting factor on the efiiciency and effectiveness of any process and that when you recognise and remove (or at least mitigate) that constraint, another pops up somewhere else the system.

I believe that the same is true with risk; that the work to cap and control a risk that is seen as addressable creates a double, or triple whammy. It distracts resourceby focusing it on the specific areas and limiting the effort applied elsewhere, it means that a new key "risk" develops in a previously unrecognised place and while it creates a false sense of security - until the next time.

It reminds me a little of the arcade game, called something like Bash a Gopher. In the game a series of gopher (desert rodent) heads pop up from holes on the board and the player attempts to bash them down again with a large mallet. No matter how many or how fast you bash them down more pop up and indeed the better you get the faster and more plentiful the gophers become.

In truth it occurs to me that maybe this is more like Caddyshack. In the film Bill Murray plays a groundskeeper on a golf course, battling against a gopher. In the end his obsession in killing the gopher causes more damage to the golf course than the gopher was doing or likely to do.

Now I clearly don't have a magic wand to solve these problems or I wouldn;t be sitting here writing this, but I do believe that we need to look for new ways to address these issues. Just doing more of what we have done before is clearly not working.

If we don't then "the crisis" that will inevitably ensue will force a far less palatable change upon us and that will be painful for everyone! It is a question of act now or ache later.