2008 Market Crisis Black Swan, Perfect Storm or Tipping Point?

It has become increasingly common to label catastrophic events as black swans, perfect storms and tipping points. When crises occur today, common responses include deflection, defense, blame and cover-up, behaviors that increasingly are accepted as a means to protect individual and organizational in...

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Journal Title: Bank Accounting & Finance pp. 20 - 26
Authors: Anthony Catanach, Julie Anne Ragatz
Format: Article
Language: English
Published: Apr/May 2010
Subjects:
Summary: It has become increasingly common to label catastrophic events as black swans, perfect storms and tipping points. When crises occur today, common responses include deflection, defense, blame and cover-up, behaviors that increasingly are accepted as a means to protect individual and organizational interests. A black swan event is a low-probability, high-impact occurrence that can be either positive or negative in its effect. A black swan is prospectively unpredictable, but everybody could see it coming after it occurs. The perfect storm premise is that none of several factors was individually powerful enough to create the resulting storm; when they came together, however, their confluence created an effect that was exponentially more devastating than anyone could have imagined. As for tipping point, Malcolm Gladwell, the term's creator, views this as the moment when an unfamiliar idea or behavior crosses some imperceptible threshold and suddenly spreads with the "speed of a bush fire. Federal Reserve Bank officials now openly refer to the recent financial crisis as the burst of a "housing-and-credit bubble" and are actively pursuing regulatory and monetary strategies for preventing such bubbles in the future. Clearly, much work must be done over the next decade to reengineer our financial markets and their supporting regimes to inoculate our global markets against black swans, perfect storms and tipping points.
ISSN: 0894-3958