Computer models will only get you so far when complex financial instruments rely on past history, not future performance. I think that sentence captur

Computer models will only get you so far when complex financial instruments rely on past history, not future performance. I think that sentence captures the main point of this crisis. I am concerned that current money arrangements have an inevitability built into them that a prolonged boom will create a bubbles based on highly leveraged circumstances with lots of counterparty risk. One thing you could do would be to outlaw fractional reserve banking altogether (make banks actually store what they say they have) but I'm not sure that the benefit would be worth the cost and expect it will fail anyway - if the system becomes too much of a harness then people will just operate outside of it. Regular downturns is the only thing I can think of to keep things sensible. Without them the dynamic chases the sensible people out of banking. (I don't hold with the theory that the current crisis is a result of banking liberalisation decisions by the US gvt - the US regulators relaxed the rules to stop US banking from being outplayed by the Europeans who were already consolidating.)