AAAs proved more dangerous than “junk”
Of course real disasters are more prone to be found in sectors perceived as less risky than those thought as more risky, if only because when entering the latter we are all more careful.
Having said that though reading Michael Milken, who was known as the Junk Bond King, telling the world now that “investors will lose more money on AAA credits than on any other rating category”, is a wonderful reminder of how little we really know about risk and cosmic order, and it should hopefully help to humble some regulators.
As for me, in the title of his article “Prosperity rests on human and social capital”, October 5 I would have loved for Milken to also have included in the title “and the willingness to take risks”; so as to help make clear that we are running risks when allowing our bank regulators to impose special taxes on perceived risk.
Having said that though reading Michael Milken, who was known as the Junk Bond King, telling the world now that “investors will lose more money on AAA credits than on any other rating category”, is a wonderful reminder of how little we really know about risk and cosmic order, and it should hopefully help to humble some regulators.
As for me, in the title of his article “Prosperity rests on human and social capital”, October 5 I would have loved for Milken to also have included in the title “and the willingness to take risks”; so as to help make clear that we are running risks when allowing our bank regulators to impose special taxes on perceived risk.
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