Noah denkt™  -
    Project for Philosophical Evaluations of the Economy
You need Java to see this applet.
The main error in financial logic
Dialog with the Alter Ego on Bernanke’s Atlanta speech from Jan. 3, first drafted on Jan. 11,
published on Jan. 21, 2010

Question from the Alter Ego of Noah denkt™ (AE): What does Noah denkt™ make of Ben Bernanke’s comments
on Jan 3., according to which it has not been the cheap money policy of the previous FED chairman which has
caused the current financial crisis but much rather the lack of supervision which had led to the prior bubble build-
up phase?
Answer of  Noah denkt™ (Nd) : We believe that Mr. Bernanke is right in pointing out that the previous FED policy
wasn’t altogether wrong. He is also right in highlighting the fact that more supervision in banking activities is
required. He is wrong though to suggest that the next financial bubble can be avoided by such supervision.

AE: In other words, you do believe that the majority opinion of the private financial sector which in deed does view
Mr. Greenspan as the main culprit for the current economic mess is wrong?
Nd: Yes.

AE: And does it worry you that there is no consensus in the financial industry about what the main mistakes are
that instigated the current disaster?
Nd:  It worries us tremendously that neither Mr. Bernanke nor Wall Street have so far been able to understand the
main mistake that actually led to the current economic crisis.

AE: And what is that main mistake?
Nd: It is the fact that the current financial logic according to which the private sector has no other obligation for the
preservation of the common good than to maximize their profits within the rules of the law is plainly wrong.

AE: Why is that logic which, by the way, is supported both by Mr. Bernanke and Wall Street, wrong?
Nd: It is wrong because it doesn’t sufficiently acknowledge the difference that exists between the barren letters of
the law and the actual spirit of it. In other words, there are a lot of activities which may not be in violation of the
letters of the law but which nevertheless still infringe heavily on the spirit of that law.

AE: So you think that the law itself does not do a good enough job in protecting the spirit of the law?
Nd: Well, we believe that the expectation that one has to have of the private financial sector is that
it should go a
step further than simply complying with the barren words of the regulations and instead embrace the actual spirit
of them. And there is no better way to do that but to measure one’s actions against the precepts of the categorical
imperative which stipulates that you should not do something to someone else that you yourself would not want to
be the recipient of.

AE: And you truly believe that it is possible to follow that philosophy and be profitable and successful at the same
Nd: Absolutely. In fact, we believe that there is no other way to generate profits that you can actually benefit from
than to follow this idea. After all, all other profits which you may be able to make by bending the spirit of the law
will eventually turn against you just as rapidly as you have generated them in the first place.

AE: Why do you suggest that some profits actually damage your future prospects rather than enabling and
improving them?
Nd: Because the lack of honesty which you have employed in making these earlier profits will sooner or later
result in major strategic mistakes that you will make when allocating subject funds. After all, you will not have done
enough previously to identify true value. And so it is only logical that you will now have a very hard time to
interpret the value of an investment adequately. For, you will not be able to bring the same forensic skills to bear
that you would have been to employ if you had tried to achieve the highest level of prudence right from the start.

AE: Isn’t there a lot of wishful thinking in this?
Nd: Not at all. Do not forget that nowadays markets are highly complex and abstract instruments. And so it takes a
tremendous amount of analytical skills to actually get to the bottom of an issue there. If you, therefore, have not
trained yourself in honest thinking you will not be able to reach that forensic depth which alone can help you to
successfully survive the complexities of modern markets.

AE: Okay, let’s assume that you are right and that a moral behavior is in deed the only recipe to generate
sustainable profits nowadays, why then would the inclusion of the categorical imperative into the financial logic
avoid future bubbles?
Nd: It would not avoid future bubbles, but it would make them less likely to happen.

AE: So, it’s actually impossible to have a bubble free economy?
Nd: Yes, that is impossible.

AE: So why bother then to begin with?
Nd:  Because every bubble that you can avoid helps to make the lives of people a little less cruel. And that is a
worthwhile goal in itself.

AE: Okay, I understand that.
Nd: Great, then let’s leave it at that
© Landei Selbstverlag, owned by Wilhelm ("Wil") Leonards, Gerolstein, Germany. All rights reserved.

Reminder: Noah denkt™ is a project of Wilhelm ("Wil") Leonards and his Landei Selbstverlag (WL & his LSV). Consequently, all
rights to the texts that have been published under the Noah denkt
brand name are reserved by WL & his LSV.

The commentary and the reasoning that was provided on this page is for informational and/or educational purposes only and it is not
intended to provide tax, legal or investment advice. It should therefore not be construed as an offer to sell, a solicitation of an offer to
buy, or a recommendation for any security or any issuer by WL & his LSV or its Noah denkt™ Project. In fact, WL & his LSV
encourage the user to understand that he alone is responsible for determining whether any investment, security or strategy is
appropriate or suitable for him. And to leave no doubt as to what this means we urge our user to also note our extended