A common refrain when the crisis first hit was that no one could have seen it coming. It was the financial equivalent of the meteor that wiped out the dinosaurs. All the diversification and hedging strategies that were supposed to keep banks from blowing up were, as David Viniar, the chief financial officer of Goldman Sachs put it, blindsided by “25 standard deviation moves, several days in a row.” This is similar to the “ten sigma event” claim reportedly made by John Meriweather when his hedge fund, Long Term Capital Management (LTCM), blew up in 1998.

Mark Blyth, Austerity, loc. 103