As I cascade through the channels, I came across President Obama and his fellow Democrats, stand on stage being cheered and praised for passing the Dodd-Frank Wall Street Reform and Consumer Protection Act, earlier today. This spectacle came off a bit pompous on the screen. President Obama, the rhetorical execute that he is, gave the awe inspiring speech in order to sell this reform bill to the American people. One of many comments that he made, caused me to raise my eyebrow because it really showed me how ignorant he really is, that we are entering a new era of increased complexity. He states, “It is an indisputable fact that one of the most significant contributors to our economic downturn was an unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess.”
This statement may be true, but the real underlying cause of our financial meltdown was due to the lack of resiliency of our financial system. Regulators and reformers are the old thinkers who believe that the best way to combat against outside shock are to create a system that is resistant against shock. This only works in predictive circumstances of pre-globalization, where our systems weren’t networked together creating an interconnected global system. In the era of interconnected financial systems, the only really solution to combat against outside shock is to create a system of resilience.
The only way is to view our financial structure and any other system as being an immune system. The human body has the best resilience against outside shock because our immune system grows stronger and immune to illness through building durability. The worst thing a doctor can do to a patient is to prescribe an antibiotic upon signs of an illness, because their immune system will not have built immunity against it. We must put into place, mechanisms of resilience so that our system will grow stronger and immune to outside shocks. The snap in our financial system was due to our inability to recognize the inaptness of resistance reform.
All system must be resilient because outside shock will always test the flexibility of that system, and if it is durable enough, it will bounce back into place. Reformers and regulators can regulate all they want against outside shock, but eventually the “bubble boy system” will be tested by outside shocks, and because they refuse to build durability into our system, it will snap and break under the pressure. We will be reliving the same cycle of incompetence, and a permanent “lock-in” of mistakes and inflexibility will become a prison we cannot escape.
From examiner.com published on July 21, 10:36
