A good corrective to the view “no one saw it coming” is reading Paul Blustein’s book on the Argentine 2001 crash titled “And the Money Kept Rolling In (and Out).

He details the roles played by rating agencies, bond traders, index trackers, the IMF, the Argentine government and other key actors in that country’s disaster. He prophetically makes the case for the US being vulnerable to a future shock.

Sitting in DC in 2005, Blustein wrote: “It could happen here. Americans who give Argentina’s story fair consideration and conclude otherwise are deluding themselves. The risks are much lower for the United States than they were for Argentina, but they are unacceptably high. The United States has shown every sign of having a cavalier, incautious attitude in the first few years of the twenty-first century.”

Looking back it seems pretty clear a disaster was waiting for a tipping point and the Lehman Brothers decision of Paulson, Geithner and Bernake started the snowball rolling down the hill. If they had saved Lehman temporarily something else would have come along to start the unravelling.

The risk measurement/management guys who didn’t see it coming may have been blinded when their intellectual conceit convinced them their models were not flawed or maybe it was just the big bucks they were being paid!

Unfortunately the depth and scope of problems with the international finance model that was crafted mostly in the US are so massive that unravelling the mess and setting it on a rational path may take many years. A good start would be with corporate governance and the inherently corrupt compensation structure.

The entire system has become rigged and unrigging it will be fought tooth and nail by its current stakeholders. The fact that they own much of the Congress, both D’s and R’s, have their shills peppered throughout the Fed and Treasury and dominate the media message machines doesn’t bode well.