I just read both the NY Times and Washington Post reporting on the weekend’s big Wall Street story, and–espeically after reading this story in the Times about The Heart of the Problem— I find myself remembering This American Life episode on the “Giant Pool of Money” which is floating around the internet and is by far the best account in descriptive but simple terms of what happen and is causing the mess now.
I don’t want to chime in and say much about this, beyond reminding people of two things.
A. Over the history of the Stock Market, the value it trades has only gone up. The take away on this is to leave your money in the market even if it’s at an all time low or worse then it was when you bought it. It’s counter intuitive, but if you do you research in the first place and diversify your holdings, then you are going to make money so long as you do it over the long term. (I admit that a historical truth is not proof that it will last, but at least indicative of a pattern worth noting.)
B. What’s happening here is a design issue. As much as I believe Obama is likely to be better for humanity (specifically Americans) given he will bring more change then McCain, neither has shown much in the way of real willingness to put forth the radical change that is necessary. To quote a line from the NY times, “what’s going on is something we are all familiar with: denial.” The catch is that this is not just denial of the marketplace, but a denial of the state of the world, aka reality.
You can’t fix this problem just by regulation alone, nor will deregulating more of the market fix it. It’s a design issue that starts with a basic ability of people to be well informed by asking question and knowing how to get real answers.
Don’t get me wrong, this is a situation that we need to deal with in the short term as well as the long term, but you don’t get rid of the mice by closing the door and setting a few traps, you get rid of the mice by learning how mice work and adapting to them (as well as accepting them).