The Invisible Hand

Bailout, bailout & more bailouts...
Regulation, regulation & even more regulations...

Where did everything begin? How did it all happened? Actions by Americans are now affecting the entire world & even future generations. Some argues it was partially attributed to the Chinese. It's the chicken or the egg dilemma. Others like Soros is now chanting about the 'downfall' of America for the next decade. We are all in a mess but life still goes on, albeit slowly & painfully. I'll leave the analysis to the media, regulators & market participants. Am hardly in the position to argue a position, if I've one to begin with, that is.

Las Vegas, where the invisible hand rules

In the last decades, I've seen enterprises across the world deviated from their original goals. What they set out to do is no longer of concern (or had been long forgotten). The only key measurement for many is ROE. It is not a matter of survival but a matter of maximizing profits (and many a time, not for the shareholders, but for the employees' and directors' renumeration; up up & away, super performer, we had been told). The system is set up in such away that one is compelled to adhere to crowd behavior. Join the crowd or be left out of the race. Stiglitz (2001 Nobel Prize winner) argued instead that "the reason that the invisible hand often seems invisible is that it is often not there" & " ... research since then has further clarified why free markets, by themselves, often do not lead to what is best. "

This idea has since come full circle, it seems. The ethics of businesses & institutions are being questioned. Corporations' internal audits come into scrutiny. High fliers have been told it's payback time. Instead of pay it forward, they had collected it in advance! So, it'll be interesting to see if the Obama administration is able to enforce some kind of order into the world we are all living in now. Thanks, but no thanks, invisible hand!

Today's Read: Stiglitz on current financial crisis & state of the economy (Columbia Business School), Obama's Ersatz Capitalism (NY Times), Soros says U.S. faces 'lasting slowdown' (Reuters)

Today's Video: Future of Capitalism (FT)