The tenet of Occam's Razor states that the simplest solution is always the best solution. We are now mired in a world full of financial complexity that threatens to bring us all down. As an example, please read and try to understand what happened to MF Global that caused it to go belly-up recently, see
Corzine's Monumental Flub and
Another Take. So, what is the simplest solution? I believe we need to return to the basic accounting rules that have been established over the millennia where an asset really is an asset and a credit really is a credit.
For a number of years the MBA geniuses in the financial community have been standing these accounting rules on their heads with a lot of hugger mugger that conceals and distorts the financial well-being of institutions. Jon Corzine, when he was at Goldman Sachs, himself helped Enron turn liabilities into assets and consequently bring down this erstwhile staid firm. And even our own Federal Reserve Bank is now playing in this sullied sand box, see:
Finger on the Scale.
How did this happen? I blame the Financial Accounting Standards Board (FASB), the big accounting firms, and the accounting community in general ... who have earned their Street creds by dreaming up new ways of subverting our tried and true accounting principles. And they have created financial instruments of greater and greater complexity (see the MF Global reference above) whereby even their creators don't fully understand all the possible consequences of a rapidly changing environment.
We need to return to accounting basics and strip out all the FASB rules that permit these financial shenanigans by creating reporting exceptions to reporting exceptions to reporting exceptions ... and permit multitudinous off-balance sheet transactions and fiscal slight-of-hand. And Congress needs to pass stringent laws that disallow any financial instrument to be created and traded for which Joe Biden cannot comprehend and explain in one sentence.
