Ability to track risk has shrunk forever!

Moody's says it can no longer track risks, according to Reuters.

The complexity of the global financial system and the imbalance of information available to market participants means the ability to track risk has declined 'probably forever', Moody's Investors Service said on Monday. 'It is extremely unlikely that in today's markets we will ever know on a timely basis where every risk lies,' analysts at the ratings agency, led by chief international economist Pierre Cailleteau, wrote in a report. …

"The problem in the case of extreme complexity of inter-connecting financial systems is that it is hard to see how the level of information could reach levels adequate to enable reasonable risk management standards," the agency said.

Ratings agencies have been viewed as one of the means for increasing information available in the market, but Moody's said this had proved "somewhat unrealistic when the incentive structure of (subprime) loan originators, subprime loan borrowers and market intermediaries also shifted in favour of less information".

Transparency is the new opaqueness.