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Nobel Laurete Economist Paul Krugman published a great article in New York Times magazine titled " How did economists get it so wrong? ", which is in essence "the brief history of American Economics." In the wake of the financial crisis, economics profession will definitely do some soul searching, and this article explains which souls are to be found in the near time future. Those intrigued by this article should definetely have a look at this somewhat long, but very exciting New Yorker article on the same issue. It draws parallels between postmodernism in human sciences and the current crisis. Finally, for those of a somewhat more geekish taste, this Scientific American article is also great. It describes the mathematical models that gave the buyers and issuers of the toxic derivatives a false sense of being in control. In the end, I believe what we should take out of this mess is, that we need a healthy dose of skepticism in every aspect of our lives. Finally, f...

"What are the roots that clutch, what branches grow Out of this stony rubbish? Son of man: You cannot say, or guess, for you know only A heap of broken images, where the sun beats... Waste Land - T.S. Eliot" In the wake of the financial crisis, people called for more regulation. Regulation and transparency. More regulation by whom? By the same people who got us into this mess? By the same people who were running a Ponzi scheme, and Nasdaq at the same time? I think we generally tend to underestimate our inclination to make mistakes, overestimate our powers to solve them, and our willingness to ignore them. In my humble opinion this is the fundamental reason behind the crisis we are facing now. To understand which simple flaws in human behavior lead to the crisis, I recommend the brilliant animation by Jonathan Jarvis, titled "Credit Crisis Explained". Thanks to Engin for bringing to my attention. The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo Those...

The Paulson plan which aimed to "save the US/Global economy" was a 3 page document. The number 700 billion was based on NO data points. The best brains of the best capitalist economy -Paulson was a long time CEO of Goldman Sachs- chose an arbitrary large number. An ARBITRARY number. With suggestions that the Lehman's toxic assets only can be as large as 400 billion , this number may not be enough. With such bright minds in the leading positions of the government, I cannot understand how people can be lured with the dream of regulated markets. By the way, here is a quotation from a real bright mind about this issue. There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers. Richard Feynman PS: Have a look at this hilarious mock e-mail that explains Paulson plan as one of those mails you receive from t...