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Every 20 Years Wall Street Loses its Mind

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I was talking to a friend last night about the economy, and he stated the above quote…noting that the market has a short memory. Every bubble in history is built on the thought that this time is different, but opportunity leads to opportunism leads to corruption leads to collapse. Trade away the future until there is nothing left, and then start over again.

The Daily Show offers a humorous look at the economy and you

With the recent worries on Wall Street leading to government bailout after bailout deregulation failed badly.

We now see that the grand experiment of deregulation has ended, and ended badly. The deregulation movement is now an historical footnote, just another interest group, and once in power they turned into socialists. Indeed, judging by the actions of the conservatives in power, and not the empty rhetoric that comes out of think tanks, the conservative movement has effectively turned the United States into a massive Socialist state.

The problem is not regulation, but short term opportunism. People will always work within the limits of the loopholes that exist. Regulators can at best be one step behind.

Unless corporations have a real opportunity cost that prohibits them from fudging the numbers the standard will be fraud, or step away from it…every time there is a bubble we can expect the whole market to chase it, especially if the government undermines moral hazard and saves these companies that should no longer exist.

Written by admin

September 19th, 2008 at 8:55 am

Posted in bubbles,economics

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