Says Paul. Paul is referring to the thesis that market would have to be extremely dumb to allow the government to catch it short with bad policy.
Ignoring for the moment which institutions prevented the adjustment in global imbalances, the market was forced to deal with something unsustainable. An intelligent market would choose the crash point and implement the crash with efficiency, which it did. The counterfactual then becomes, if the market knew of an impending crash the correct adjustment would be counter bets, insurance, system wide risk sharing.
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