I spent most of my time in firmwide risk management at Goldman trying to get traders to mark their exotic products to market, or else find a good proxy for it. Mark to market was the unquestioned gospel. Now it’s totally astonishing to see the beginning of a backlash against mark to market. Some people are even suggesting moving averages of prices, which would once have been regarded as near to criminal mismarking and managing of volatility, to be watched for and prosecuted.

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It reminds me of a line from “The Leopard” by Giuseppe di Lampedusa: If you want things to stay the same, then things will have to change.

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There are reversals of what passed for common wisdom everywhere. I suppose this is one of the characteristics of the social sciences and the so-called sciences of nutrition, sociology, etc. when compared with the natural sciences, the total turnabouts from butter to margarine to butter.

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I never fully realized just how much the banking system is the lifeblood of the capitalist economy — well, perhaps money is the lifeblood and banking is the lungs and heart, effecting a swap between unoxygenated and oxygenated blood. As someone pointed out on yahoo today, when pets.com… dies it doesn’t affect the financial sector, but when the financial sector dies it affects pets.com…, hence the bailout of banks rather than internet companies.

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