In his first pre-Budget report as Chancellor, the infamous ‘boom & bust’ phrase, that mantra Gordon Brown came so steadfastly to believe in, can be seen lurking in the opening paragraphs. What this showed was that Gordon Brown held no singular understanding of risk, and/or the global economy.

Over the past 18 months we have heard continual cries for risk to be curbed. Yet risk is something that humans curb naturally: by learning from their errors. What bailouts and new systems of regulation achieve is that the various parties involved in the financial meltdown do not learn, as the bonuses at AIG show.

Lawmakers have to understand that risk is inherent in all that we do, which is why we have a ‘natural’ system that ‘booms and busts’. Unfortunately for us, lawmakers have taken it upon themselves to concentrate the control of the economy in their own hands with the result that the peaks of growth and the troughs of contraction become ever higher and deeper respectively.

Gordon Brown and those who invested based on his assertion that boom and bust were over are much like King Canute and the tide. They failed to understand the risks involved, and also misread all of the information that was available that would assist them in investing wisely.

Gordon Brown had to make a quick buck so as to cover the 50% rise in taxes that he had implemented, whilst others believed that the prices could only ever rise and that somehow risk had been vanquished. Those in the business and banking world should now be made to learn from their failures, not through new legislation and regulation but through the cold hard fact that the risks they took were wrong; they should be the warning to us all not to allow risk to be undervalued and taken for granted.

Risk is a cold-hearted mistress.