The financial roller coaster ride continues in Wall Street. And today’s victims include Morgan Stanley and Goldman Sachs. While there are optimisms regarding the government’s bailout of AIG, the widespread solvency problems still stand strong. Today, lets focus on how to nurse the patient back to health instead of leaving him on life support.
Looking back to the source of the whole crisis, some may blame the decline of the US housing market and some will blame the rating agencies such as Moody for not doing their jobs. The truth is that playing the market is gambling and there will be winners and losers. The key is to limit the players to those who can afford to lose. Only with a fundamentally sound and strict system, confidence and credibility can build up. So first things first, there is a need to revamp the financial structure and regulations of at least the major markets in the world – US, Europe, Hong Kong and China.
For example, there are many predatory short sellers taking advantage of the suffering market. When the prices have been forced down so low from shortselling and vicious rumour mongering, it takes away the ability of these companies from raising additional finance that they so badly need. While it may even be good to take away shortselling all together (with a ban) for the time being, at the very least, there need to be regulations limiting shortselling and its effects. This would create a breathing space for the market.
When we go back and talk about creating a fundamentally strong economy system, two major assumptions need to be fulfilled: the market moves towards equilibrium and that everyone is rational. Today, equilibrium is nonexistent as day after day we move into new uncharted territories. It is also impossible for people to be rational all the time unless they are robotic. The new regulations and structure need to reflect on these facts while pushing to fulfill the two assumptions of economics. If you can increase the complexity of the system to exclude those without the explicit knowledge and then hold those in the system accountable for their actions, then there is a high chance the system will move towards equilibrium and heal itself.
I believe that we all have to take some responsibility for this period of gloom and doom. Coupled with rising commodity prices and enviromental dangers, the world is in bad shape, probably the worst it has ever been. And if we can’t work together to stop the bleeding, it will die. There is no time more crucial for the world.
Looking back to the source of the whole crisis, some may blame the decline of the US housing market and some will blame the rating agencies such as Moody for not doing their jobs. The truth is that playing the market is gambling and there will be winners and losers. The key is to limit the players to those who can afford to lose. Only with a fundamentally sound and strict system, confidence and credibility can build up. So first things first, there is a need to revamp the financial structure and regulations of at least the major markets in the world – US, Europe, Hong Kong and China.
For example, there are many predatory short sellers taking advantage of the suffering market. When the prices have been forced down so low from shortselling and vicious rumour mongering, it takes away the ability of these companies from raising additional finance that they so badly need. While it may even be good to take away shortselling all together (with a ban) for the time being, at the very least, there need to be regulations limiting shortselling and its effects. This would create a breathing space for the market.
When we go back and talk about creating a fundamentally strong economy system, two major assumptions need to be fulfilled: the market moves towards equilibrium and that everyone is rational. Today, equilibrium is nonexistent as day after day we move into new uncharted territories. It is also impossible for people to be rational all the time unless they are robotic. The new regulations and structure need to reflect on these facts while pushing to fulfill the two assumptions of economics. If you can increase the complexity of the system to exclude those without the explicit knowledge and then hold those in the system accountable for their actions, then there is a high chance the system will move towards equilibrium and heal itself.
I believe that we all have to take some responsibility for this period of gloom and doom. Coupled with rising commodity prices and enviromental dangers, the world is in bad shape, probably the worst it has ever been. And if we can’t work together to stop the bleeding, it will die. There is no time more crucial for the world.
4 comments:
what does "There is no more crucial time for the world." mean?
Means it is the most crucial time for the world. Just another way of putting it. Just thought the negative would go well with the theme.
wellllll...the negative did not make any sense......and DID NOT convey the "most crucial time" meaning...I think what you meant was "There is no time more crucial for the world."
@_@ is it not?
You're right. Changed
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