Trading in the "Fever of Boom"
Letter to the Editor

Sir, Many thanks for John Kay's excellent column "Our banks are beyond the control of mere mortals" (July 8). He is so right that it is not a matter of stupidity or incompetence. As Walter Bagehot said, it is "the ablest and cleverest the most" who in the fever of the boom "trade far above their means".

I believe the explanation is at bottom simple: leverage. No one, no matter how able or clever, can run an organisation taking serious risks that is also leveraged up to 20 or 30 or more times equity, without crashing from time to time.

There is just too little margin for the inevitable errors and unpleasant surprises in a dangerous and uncertain world.

Alex J. Pollock is a resident fellow at AEI.

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Alex J.
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Tuesday, July 29, 2014 | 10:00 a.m. – 12:00 p.m.
Is Medicare's future secure? The 2014 Trustees Report

Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.

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Watergate revisited: The reforms and the reality, 40 years later

Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.

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