Reading, watching or listening to business news one often hears things like, “instant markets,” “baked in,” or, “already reflected in ‘the market’…” This is an indication of the depth to which the mythology of ‘the market’ is ‘baked in’ to the mind set of those who are involved in the day to day coverage and operation of the business environment in the USA.
The studies revealed that the recession started in December of 2007 and was reflected in the stock market dive of September 2008; some instant market. The market is reactive, with darn slow reflexes, not proactive.
The mythology also suggests that the current mortgage crisis has core causes that are everywhere, except in ‘the market.’ The current crisis is centered on mortgage manipulation, same as (only worse than) the financial crisis of the 1980s: lots of cheap and easy credit made available while regulators napped.
Both financial catastrophes were created by ‘the markets’ insistence on demonstrated short term profit gains, and business growth (the Wall Street Two Step). Mortgages are very long term investments (15 and 30 years primarily) that introduce large quantities of money into ‘the market’ with each individual transaction; especially as ‘affordable’ housing is discouraged. ‘The market’ created a variety of kinds of “mortgaged backed” ‘investment instruments’ to attempt to pretend short term profits while allowing continued, unrestrained growth.
The Resolution Trust Corporation (RTC) cleaned up the mess of the 1980s without addressing, actually complete avoidance of, the aforementioned underlying causes. Now the US Treasury Secretary is attempting to prop up ‘the market’ with hundreds of billions of taxpayer dollars without increased regulation, and without establishing responsibility, of ‘the market’ players that are involved in the recurring financial crises.
Those who deny history feel free to repeat it.