Well, it has happened. I am very unhappy to say, I told you so. The financial crisis that started two years ago is heating up. Unfortunately I can’t tell you that I believe that the huge government bailouts have stopped the process. Is it not unfair that the US government – that has forced many third world countries from giving up its monetary controls and subsidies – is now doing exactly the same thing? Am I surprised? No. The same people that have called for free markets and globalisation so that they could loot third world countries, have previously called for trade barriers to stop foreign products from ‘stealing’ American jobs.
On the other hand, I feel that to stop the faltering of these financial institutions is a sensible step, because it slows the crash and lets everyone adjust to it. I agree that there should be game rules (I would hate to call it regulation) for the stock markets that stop traders from wild speculation. One of the game rules would be to tax stock market gains identically to any other form of income. Some of it has happened but there are still too many loop holes. Once that happens overall taxation could be reduced. Unfortunately that is quite unlikely, just as is the lowering of energy prices when the oil price finally drops.
Another form of game rule would be to limit business size. There is no need for huge businesses that monopolize the market. These huge corporations are unmanageable and their profitability is achieved on paper by constantly buying or selling revenue and/or profits. There is no need for these huge players. That is even true for the software business. There is no benefit for the market and its customers in a business the size of Microsoft.
I believe in democratic freedom and free markets for individuals and reasonable size entities so that the dynamics of economy – as far as we understand them – can do their job. Huge corporations that now suddenly are TO BIG TO FAIL are to no ones benefit. The same is true for unions, government organizations as well as for countries and towns. They are all like dinosaurs that are not nimble and adaptable enough to survive. Countries should form loose federations and businesses should cooperate rather than merge. The huge amount of legislation necessary to allow these large businesses on the stock market has not stopped the Enrons and Worldcoms from fraud and it has not stopped the Lehmans from failing. It has however stopped many businesses like ours from going public. Smaller entities would also be easier to understand for the investor and if they fail it would be economy at work.
So don’t hold your breath – it is not over yet!