> Look at the market, is there really a deficit of risk-taking? I think there is a deficit of understanding of the risks but there is a massive excess of risk-taking in pretty much every asset class.
There's a deficit of risk-taking in a crisis (and maybe an excess of risk-taking in "normal" times). In the old days crises would be softened by market makers who were willing to act as de facto prop traders and buy at the bottom for their own account - an extremely risky trade ("falling knife") but an extremely lucrative one if you get it right. Nowadays the algorithmic herd just exits the market when times go bad, and if you did do the trade and make a killing then you'd get your trades broken ("clearly erroneous") and have to fight a lawsuit and it just wouldn't be worth it.
There's a deficit of risk-taking in a crisis (and maybe an excess of risk-taking in "normal" times). In the old days crises would be softened by market makers who were willing to act as de facto prop traders and buy at the bottom for their own account - an extremely risky trade ("falling knife") but an extremely lucrative one if you get it right. Nowadays the algorithmic herd just exits the market when times go bad, and if you did do the trade and make a killing then you'd get your trades broken ("clearly erroneous") and have to fight a lawsuit and it just wouldn't be worth it.