Redrawing the Boundries Between Government and Market
A special report commissioned by the Economist analyzed the events of the market over the past 14 months in an attempt to draw conclusions about where this all will end. Unfortunately, as is the case with many special reports, there are no concrete or even some-what believable conclusions. However, the recurring theme throughout, always returned to the idea that the government regulation of markets will irrevocably change. Their argument follows that, since this crisis will result in an economic catastrophe the government will redefine its interactions with the market. They point to the great depression as an example of this response from the government. One may posit the 1980 recession as evidence against this but the Economist explains that the 1980 recession never resulted in an economic catastrophe, thus government regulation remained unchanged. However, if we follow this reasoning, then government regulation will not change much now. Many economists aver that the government had no choice but to nationalize Fannie Mae and Freddie Mac and take over AIG, in order, to prevent the effects of these Banks from collapsing from reaching “Main Street.”
Our current situation is mainly attributed to the actions taken by the Fed’s Bernenke and the Treasury’s Paulson to back key firms vital to the stability of the system and supply hope in the form of a $700 Billion buy-up of toxic assets. As far as we can perceive, those actions have succeeded and the economy has managed to dodge the potentially fatal ”wall street bullet.” Even the Economist concedes that most small firms are stable, albeit household debt is unprecedented. Therefore, this leads us to conclude that the system is not malfunctioning but that the deregulatory actions the S.E.C. took back in 2004 in conjunction with a number of other calamitous circumstances; namely rises in commodity prices (energy/oil) in addition to desperate firms riding on the dot-com bubble transferring to the housing bubble. It’s not that regulation needs to change, but that the interactions between the market and the government needs to be altered. This relationship change needs to come in the form of OVERSIGHT. All the problems we face now could have been superseded with a little oversight.
At the end of the article, they raise an interesting concern which many have neglected in-light of the banking bust; dollar value. The dollar’s precipitous decline in value caused alarm before all the banking hub-bub. However, once the housing crises reared its ugly head, the dollar’s value fell quickly to the way-side, although the problem never abated. The good news comes from the fact that our problems are hurting everyone else’s currency, increasing the dollar’s value and closing the gap with the Euro. Ultimately the government will not impose wide sweeping changes on a system which has succeeded so well. After all, the market fell short because, in part, because of the changes the second Bush Administration imposed. We need oversight and we need the leaders of Wall Street to change “business as usual” to a more responsible and cooperative stance with the government.
-MB
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“When fortune frowned.” The Economist. 9 Oct. 2008.The Economist.19 Oct. 2008 <http://www.economist.com/specialreports/displaystory.cfm?story_id=12373696>.
Financial Jargon
Dear Readers,
I apologize for the slight hiatus in my posts; unfortunately, school has been rather busy lately, but luckily it is beginning to lighten up now that all my classes are on cruise control. But until I can post something serious, please enjoy a little light humor. These days when everything seems to be going down the drain, it’s important to laugh…just a little…maybe not too much…but a little. This is a short list of stock-market terms my mom sent me last week:
BULL MARKET — A random market movement causing an investor to mistake himself
for a financial genius.
BEAR MARKET — A 6 to 18 month period when the kids get no allowance, the wife
gets no jewelry, and the husband gets no sex.
VALUE INVESTING — The art of buying low and selling lower.
P/E RATIO — The percentage of investors wetting their pants as the market keeps
crashing.
BROKER — What my broker has made me.
STANDARD &am p; POOR — Your life in a nutshell.
STOCK ANALYST — Idiot who just downgraded your stock.
STOCK SPLIT — When your ex-wife and her lawyer split your assets equally
between themselves.
FINANCIAL PLANNER — A guy whose phone has been disconnected.
MARKET CORRECTION — The day after you buy stocks.
CASH FLOW — The movement your money makes as it disappears down the toilet.
YAHOO — What you yell after selling it to some poor sucker for $240 per share.
WINDOWS — What you jump out of when you’re the sucker who bought Yahoo @ $240
per share.
INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.
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These may be funny but they do represent the general sentiments of most Americans right now.
-MB
The New Yorker Chooses Its Candidate of the 21st C.
Readers,
This column composed by the editorial staff at the New Yorker provides a thorough analysis of Obama and McCain; recalling their personal and political histories while providing insight into their current views. Their analyses are partnered with a catalogue of the pressing issues facing the next president; from the economy, to Iraq, to energy with Obama unequivocally emerging as the most appropriate candidate to confront the problems. Since the campaigns are near their cessations, we have seen the true colors of each candidate and the weight of each candidate’s platform is now evident. Please read this article, it may be somewhat lengthy but it will stimulate thought and provide a clear perspective, regardless of political affiliation. Here is, perhaps, the most impactful passage:
“The next President must also restore American moral credibility. Closing Guantánamo, banning all torture, and ending the Iraq war as responsibly as possible will provide a start, but only that. The modern Presidency is as much a vehicle for communication as for decision-making, and the relevant audiences are global. Obama has inspired many Americans in part because he holds up a mirror to their own idealism. His election would do no less—and likely more—overseas.”
-MB
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“The Choice.” 3 Oct. 2008. 3 Oct. 2008 http://www.newyorker.com/talk/comment/2008/10/13/081013taco_talk_editors.
