Too Much Data, Little Information

Among all the various issues to be addressed in trying to dig out of the current crisis, Mark Thoma argues for the importance of information you can trust. And trust in information - whether from a credit rating agency or a CPA's audit - is in short supply today. He argues "even if we recapitalise every bank that is in trouble, remove every existing toxic asset on every bank balance sheet, and refinance every mortgage so that it is not in danger of default, we still will not have fully repaired financial markets. We will still be left with a lack of trust—for good reason—in the informational architecture people use to make financial decisions." He has a point.

His solution is "to provide insurance against the risks caused by the lack of information during the time period when the information flows are being restored". Whether its government or private insurance is immaterial to him. The important issue is to restore trust.