Because of an editing error, an article on Page 36 this weekend about the failure of economists to anticipate the latest recession misquotes the economist John Maynard Keynes, who compared the financial markets of the 1930s to newspaper beauty contests in which readers tried to correctly pick all six eventual winners. Keynes noted that a competitor did not have to pick “those faces which he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors.” He did not say, “nor even those that he thinks likeliest to catch the fancy of other competitors.”
Because World War II left the empires weak, the colonized countries started to break free. In some places, where countries had the potential to bring more democratic processes into place and maybe even provide an example for their neighbors to follow it threatened multinational corporations and their imperial (or former imperial) states (for example, by reducing access to cheap resources). As a result, their influence, power and control was also threatened. Often then, military actions were sanctioned. To the home populations, the fear of communism was touted, even if it was not the case, in order to gain support.
While this mismatch between leverage, and policies designed to curb it persists, the authorities are paying little or no attention, it seems, to managing the funding problem that is brewing as excessive lending comes to depend more and more on riskier instruments and products. Much of this is occurring in the interbank and repo markets, where institutions sell instruments with short maturities to buy them back later. Generally, banks are borrowers from these markets, while the suppliers of funds are money market investment vehicles such as WMPs, trust plans, and money market mutual funds. The IMF has noted that in 2015, 61 per cent of WMP assets had maturities of less than 3 months, and 13 per cent had maturities of less than a month.