I agree with your idea of assymetry of information being dangerous following your 2008 financial crisis example. I believe several of us have studied models that include the costs of assymetry of information on the Industrial Organization course.
I want to ask you and our fellow class mates the following… at what extend is the divulgation of information moral? think of what could be the consequences of revealing sensitive financial information to the markets. Speculation can sometimes have overeacting consequences, wouldn’t you agree?
I want to compliment your comment by adding the counter example of your idea. I mean, is there a situation in which the assymetry of information is actually benefitial? Let’s consider monetary policy:
On theory, the Fed’s Fund Rate should be bounded at it’s minimum to the Interest on Reserves (IOR); while bounded at it’s max at the interest discount rate.
Bear with me for just a sec.
The IOR is the lower bound because interest payed on reserves are payed by the Fed to commercial banks for holding excess reserves. If the FFR where below the IOR, banks could just borrow money at the FFR while receiving a higher IOR yield and make infinite gains.
The interest discount rate (rate at which the fed and banks lend to each other overnight) is the upper bound for the FFR. The FFR must remain attractive for banks to seek financing from the Fed. If the FFR where to be higher than the interest discounr rate, banks would seek cheaper financing from other banks, and monetary policy would simply not work.
Theoretically, this relation should hold at all times. But, at times of uncertainty, we can observe the FFR ABOVE the discount rate. Why?
Well, there is a stigma involved when banks rather borrow from the FED at the FFR rather than from other banks at the discount rate. This is because it might signal the market of solvency issues in said bank.
Therefore, the FED can allow banks to borrow each other overnight at a lower discount rate than the FFR without “public” knowledge.
Perhaps a more familiar example is the recently established discrete monetray policy from Banco de Mexico. Banco de Mexico was conducting large sales of US dollars in an effort to stabilize the depreciation of the mexican peso against the dollar. This operations turned out to have no effect whatsoever because High Frequency Traders from wall street where protecting there assets with the mexican peso, so the large scale - immediate trading countered the effects of the dolar sale.
Because of this, Banco de Mexico had to STOP announcing its sales and turned to a discrete policy in an effort to benefit from secrecy and assymetry of information.
So there you have it,
financial markets prove to have both benefits and disadvantages from disclosure of information.