While politicians have been adding more regulations and laws, the Treasury has continued to add liquidity to the system and yet the markets have continued to fall. It reminds me of the old Humpty Dumpty story ” All the kings horses and all the kings men could not put Humpty Dumpty back together again”.. The Treasury and the Congress seem a bit dumbfounded by this and wonder why the markets have not recouped their losses. Another analogy would be the case of the jilted wife who accepts her husband back after all his infidelities. She has taken him back but she has not forgotten.
The markets will remain stalled until trust comes back into the market, yes trust. The humanistic person always will seek to add another law and another regulation to solve the markets. However the markets don’t work that way because they realize you can not legislate away honesty. The markets are not working because of the tremendous leverage that exists in the system and the lack of forthrightness by many of the finance companies. The U.S system of commerce is based on credit. And by credit I mean the extension of credit by banks to fund small businesses. Once this dries up, the whole economy dries up.
The finance sector has taken the money provided by the Treasury and has been using it to shore up its own balance sheets-they have not been extending this credit to the small business owner. The finance system has been arguing all along that they are in good shape only to see one company after another go under. Over the last year we have all witnessed numerous CEO’s come out and say they are in a good financial shape only to see them go out of business ( Like Lehman). This lack of truthfulness by the CEO’s has undermined the market as the players doubt the truthfulness of theses companies and all others and begin to sell.
So I would argue , these little white lies are undermining the whole system. Over the last 20 years, teachers have cited that more and more students cheat more than ever. And, as these students in turn graduate and enter the workforce, these character defects have begun to show up. Who would have ever thought that “Thou Shall Not Lie” was actually pretty sound advise.
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