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December 28, 2011

Financial Amnesia Check Forgets A Few Things

“Financial amnesia disarms individuals, the market and the regulator.  It causes risk to be mispriced, bubbles to develop and crises to break,” says the Chartered Financial Analyst (CFA) Society of the UK in an FT article entitled “Financial History Lessons Urged to Help Prevent Future Bubbles.”  

The solution?  “The study of financial history should form a major part of all compulsory education for retail and wholesale investment professionals,” according to the UK CFA Society.  It also recommended that the CFA program include “a practical history of financial markets, designed to remind us about the effects of liquidity, psychology and regulatory failure.”  The Society doesn’t stop there.  It also “advised boards of financial institutions to undertake an annual ‘amnesia check.'”  

While it sounds like a great idea, the CFA Society seems to have forgotten the important topics of greed, ethics, morality, crime and punishment, and the eyesight problem of never seeing anything that might interfere with your economic self interest. 

Read the entire article here.

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