In the End-Zone

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1 Response

  1. Ken Rhodes says:

    “Rumors abound that financial institutions and certain of their investors are already investigating gaps in the proposed legislation that will allow them to continue to invest in exotic financial products.”

    One thing that should be painfully clear by now is that “invest” has little to do with the problems we’ve encountered. The economy of the world has been brought dangerously close to a standstill, not by bad investments by unlucky or unrepared investors, but rather, by SPECULATORS making foolish GAMBLES with huge amounts of other folks’ money.

    Investment is what helps companies, and economies, grow and prosper. Speculation is a zero-sum gambling game where one player’s gain is another player’s loss, the house cuts the pot (commissions and fees), and the rest of us hope the economy doesn’t crash.

    “Risk management” is a legitimate activity of “investors,” who [sometimes] hedge their investments in case of the unlikely disastrous event that could wipe them out. (Fire insurance, for example, or selling your crop as a “future” to protect your price.) “Risk management” to speculators is a pretty facade to cover what they’re doing so the regulators will leave them alone, since “management” requires “assessment,” which the speculators have proven they have no hope of doing accurately.

    Pecora, and Congress, got it right almost eighty years ago, and it worked fine for a long time. Then we forgot, and look what it got us. To paraphrase a campaign slogan: “It’s the incentives, stupid.”