Are there any engineers in The House?

The BBC reports that

The Italian government’s credit rating has been slashed by Moody’s from Aa2 to A2 with a negative outlook.

The ratings agency blamed a “material increase in long-term funding risks for the euro area”, due to lost confidence in eurozone government debts.

To anyone with any sort of engineering background this is as clear example as it is possible to have of a positive feedback loop leading to hunting oscillation. And the answer in this case is equally clear – break the loop and then, if it is certain that controlled feedback has some value, remake it with some appropriate hysteresis in place.

Breaking the loop means simply shutting down the ratings agencies – any useful purpose they may once have served is now vastly outweighed by the damage they are doing through providing this feedback mechanism. I would suggest also simply banning short selling for a period – this too is clearly a major contributor to hunting oscillation. Once the markets have reached a more stable state, and after a period of careful thought, then some elements of positive feedback could be reintroduced, with appropriate regulatory controls.

Sadly, with governments staffed by lawyers and under the sway of the gambling bankers I fear this is unlikely to happen. It’s a great shame that there aren’t sufficient people of a rational scientific or engineering background in government.

3 Responses to Are there any engineers in The House?

  1. Peter Pan says:

    I would stick to the hiking Chris! Shutting down the ratings agencies is akin to shooting the messenger because you don’t like what he has to say.

    If you don’t have any outside agencies rating the government debt, do you think MORE or LESS people will be willing to lend to them, knowing how Southern Europe has abused the facility in the past?

    The way to fix this problem is to treat the cause, not the symptoms. Unfortunately the cure is painful, but it is the only way to get the patient back to long term health.

  2. nulle says:

    on the positive feedback loop, there are many ways to cut the loop off…starting with the power of the amplifier (in this case Italy) bring out the reduction in benefits, more efficiency by rooting corruption and collect more taxes, less kickbacks to the mob, silicians.

  3. Jay-P. says:

    Greek, Italian, UK govts together with “Eurocomics” from Brussels and Strassbourg, …followed by US, Euro and other bankers will not allow normal citizens to cheat AAA-andoulettes as they dislike competition.

    Yet they wag their finger towards China! Bunch of hypocrites.

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