I once asked an American friend to come and talk to the Centre for the Study of Financial Innovation. He told them that he was against it. That put him ahead of his time, but Mervyn King agrees with him.
In his decade as Governor of the Bank of England, he had seen what innovation could do, in good times and bad — in crisis, and in the fitful recovery that followed. He has resisted any temptation to write a memoir with himself as hero. Instead, he has set out to explain what went wrong and what must change to stop it happening again—and since we all need to know that, he wanted to write, not in economists’ algebraic shorthand, but in English.
That shorthand gave an illusion of certainty. It encouraged banks to believe that they could measure the future and put a price on risk — and if they could measure it and price it, they could trade it.
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