Did the market get it wrong?

Amanda suggested that an argument against Van Eeden's postulation to let the market correct itself is that the market got it wrong.

As Van Eeden began to suggest it was gov't policy that caused the problem.

When people the market is offered excessively low credit costs as Greenspan did, the market took advantage of it. The market is composed of smart investors and foolish investors. The foolish investors typically can not afford credit ... Greenspan made them consumers ... he tilted policy which affects the markets reaction. When rates went up the follish investors could not pay their debts ... their money. Fannie and Freddie our instruments of gov't policy which opposes the market.

Everything the government touches these days is wrong.

They need to stay out of the economy and be involved in setting public policy, developing and enforcing regulation. Nothing more. The influence of politics and the gravitation of money towards the fame associated with high profile position is a problem ... people seek these positions for the wrong reasons ... short term and future gain

The gov't failed in regulating the derivative market (financial instruments)

They failed in interest rate setting

They failed in understanding the impacts and adapting policy

They fail in telling the truth

They fail in stabilizing the economy

They fail in fixxing the problem and they are masking how bankers got away with billions/trillions of dollars of fraudulently misplaced funds through the derivative market.

They did when it was too late recognize that their poor policy lack of regulation on financial instruments and lack of enforcement for market manipulation was about to cause bank failures and hence cause a run on the banks and thus a collapse of the system.

They may have prevented the collapse, but they would be well off to come clean .... acknowledge govt errors in policy, regulation and enforcement (they have done that).

Take control of the assets of any of the banks that faced liquidity issues ... sort out the obligations and give a hair cut to the investors ... shareholders and bondholders of the failed banks. Guaranty deposits and collect loans ... get back to S&L banking. Sort out the garbage in the investment banks cutting all the hair of all the losers - don't make the taxpayers the losers.

Get out of the businesses that gov't should not be in, allowed failed auto companies to fail, those who lose jobs either have skill sets to compete in the economy or do not ... part of smart investing is investing in varied skill sets and never put your eggs in one basket.

Obama with his change in administration has the opportunity of recognizing that a retrun to laissez faire economics could solve the problem faster .... today's politicans are no smarter than any others, no more astute economically ... the free market with proper government policy, appropriate regulation and enforcement is what works.

orgy