The False Economist

Tuesday, February 15, 2011

Finance 101

Former UK Chancellor, Alistair Darling, has a short piece in Prospect Magazine (in addition to an interview with Prospect's editor) highlighting the lack of "financial literacy" in society. He calls for the basic concepts of finance to be taught at secondary level and for older people to have the opportunity to learn about the basic concepts of finance as well.

Furthermore, he notes that this is not just a problem for laypeople, senior board members of banks and other financial institutions appeared to be in the dark at times over the financial instruments they used and the strategies they followed. This is a defining feature in what caused the global financial crisis; the over-reliance on complex instruments and models by those who rarely, if ever, understood them.

Darling makes several good points, especially about the need for more clarity in the language used regarding finance. However, I would love to see him in the future expand on these issues. As a former Chancellor he would have a unique insight in to just how out of touch some of these people were and how relevant this was to the global financial crisis.

Article (including interview) available here

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