I would be surprised that we are only at the beginning of a period of high volatility

The financial crisis and the collapse of the financial system in 2008-2009 has finally convince the world or almost there was an urgent need to implement a stricter regulation of the system.

Unfortunately, there appears to be a hiatus between these regulatory ambitions and the capacity to implement them.

Conceptually, it would appear that there is dissension between the Germany, who dreams of minimizing the financial sphere, and the United States, who want to keep large financial markets while making them less vulnerable to crises. For the Germany, it was to remove the financial instruments and strategies of sales in the short term for example, the United States wishing to their side, increase the banks own funds requirements.

The behavior of the Germany is explained in part by the difficulty to identify clear benefits of sophisticated finance. For real investments, there is of course the benefits related to the cover and the decrease in the cost of capital, but at the same time, this increases confusion among investors and the fragility of the system. The origin of the position of the United States (and without even mentioning the power politics of financial institutions), the maintenance of confidence in the capacity of finance to generate profits.

It is now impossible to say whether or not the risks inherent in high finance are worth to be accrued. There are still in the environment of the central banks a lot of nostalgia for the Taylor rule and the hope that the crisis will end and can return to the cockpit based on an inflation target. This hope is vain. It is now clear that not only regulators will have to exercise real control over financial institutions, but also that they will be required by law. Yet, how imagine that even with increased financial resources, they will be able to monitor inter alia the increase in own funds of banks (who have managed so far to not to do). More difficult to imagine the ability of regulators to distinguish the good financial innovations of the innovations to ban.

I would be surprised that we are only at the beginning of a period of high volatility. It is likely that the new regulations will be a failure and that major financial institutions will continue to roll the regulators in flour simply because they are smarter. I am willing to bet that in five years, major financial institutions will be more powerful than today ' today, that they will engage in the same activities and, with the same effects of leverage. However, it is not impossible that some of these new regulations prevent certain financial activities to develop, but we are not able to say if they will make the system more stable, or if they will trigger a redoubling of activities in the non-regulated areas of the system. This is the fault of anyone: there are simply too offset between the powers of regulators and the institutions they are supposed to regulate, by definition not making profits if inflate their balance sheets.