20th
free market is a scary thing
As everyone probably knows by now, there are some serious issues with our financial system right now. It seems to me that a series of investment firms took some big risks on loans that wouldn’t get paid back because they are too risky. Even further, a series of home owners bought homes they couldn’t afford and took these loans. Now, the market is correcting itself, and some fear is settling in, and we are all paying for it.
Let me give a quick overview of the week. Monday, the S&P 500 dropped about 4%. It stayed steady for Tues, so I thought the worst was over. Than on Wed., it dropped another 5%. Geez. Things weren’t good. I started reconsidering my investment strategy, for good reason. The fed stepped in, agreeing to pour in billions of tax payer dollars and on Thursday the market rose again.
If the fed stood by, and let the market continue to fall, the truth of the matter is the investment firms & defaulted mortgage holders wouldn’t have been the only ones that would have suffered. It would have been all the money I have in stocks. So, I am relieved they did it. But, should we be taking steps to ensure this doesn’t happen again? The problem with that is that it means regulation, and regulation will probably hurt the economy and lead to lower returns.
The free market is a scary thing. It’s great in that I can get great returns on my investments when all is going well. But when things sour, I can pay for others mistakes.
It will be interesting to see if we will be entering a new phase in the market, when it is more regulated. And, it will be interesting to see if we can have our cake and eat it too. I hope so.
