Faith in the underlying mechanics of portfolio theory and market efficiency has certainly contributed to humanity’s recent leap forward in wealth, productivity, private innovation, and global integration. But that same numerology has since crippled our aging financial system and triggered the worst global recession in nearly a century. Perhaps it’s time to reassess the value – and the logic – of bleeding edge finance.

As Professor Janeway points out in the following interview, treating securities like molecules, subject to the same variable distributions, “random walks”, differential equations, and reductionist math simply compounds the short-sighted actions of a few scientists-turned-gamblers. Not only does it greatly overstate the predictive power of econometric analysis, but it also understates the tremendous dangers of financial…

“Despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression…” This advice from the Harvard Economic Society on November 2, 1929 illustrates that unbridled optimism in the capital markets was just as dangerous 80 years ago as it is today. Modern financial crises aren’t simply failures of regulatory oversight or inherent structural weakness. They’re a combination of the cyclicality of human behavior, the dangers of unbridled leverage, increased speculation by unsophisticated investors, and our complete lack of financial memory beyond 20 or 30 years.

Currently the envy of Hank Paulson and virtually every Finance Minister around the globe, Jim Flaherty describes how the world’s leading middle-power managed to side-step most of the financial devastation that’s haunting global financial markets, and what the world can learn from its sure-footed path…

As institutions around the world tighten their belts in response to the coming economic storm, we can only glimpse from their preparations the full breadth and depth of of “The Great Correction” and the many ways capital markets dictate the rules in our daily lives…

While the world comes to terms with yesterday’s historic call for change, Nouriel Roubini and his team have pulled together a laundry list of the many great challenges that lie ahead…