Are you suggesting that these hedge funds have attained some sort of deity status, whereby they can put the financial world in potential economic peril
Listen Mark, I don't condone what LTCM, Tiger Fund, or others were doing... but the fact remains that they couldn't have been able to do it had banks excercized proper risk management controls before extending credit to them. Hedge funds do serve certain important purposes in providing liquidity to markets on their arbitrage plays.
and shorting the overall market, an option not available to "long only" mutual funds.
Hedge fund are not evil, and they have been around for decades. The problem is when these Nobel Laurelates "know it alls" fail to take into account how global political and economic risk can severely degrade their portfolio positions.
Banker's Trust almost went belly up last Nov. when their reserve requirements fell below the 3% threshold. In response, it is alledged that the Fed undertook their surprise lower of rates in response to Banker's Trust financial turmoil and in a plan to restore their liquidity.
So was that right?? What was the risk to the system of having one of the largest banks suddenly go belly up?
It would have sent shockwave's throughout the US financial system and tainted other financial institutions as being unsound as well. And ultimately it would have political ramifications for leaders of the country.
So at its heart, bailing out LTCM was a political decision. It was a decision made to maintain political and economic confidence in the US. Destroy confidence in the system, and the value of money is destroyed, whether that system is gold-backed or Fiat.
All of the goldbugs realize that a Fiat system is essentially "a confidence game".
What they fail to admit or objectively look at is that GOLD is just as much a confidence game.
I wish you all would be honest with yourselves and realize that gold only has value if other people hold that same value for exchange goods and services.
And I suggest you look back in history to times when gold and silver competed for dominance. Gold became worth"less" to a greater degree as Silver gained favor. At other times it would be the inverse. Gold and silver undercut the confidence in one another and people who hold one or the other oftentimes find their assets becoming worth"less" as the other gains in value.
Gold is not a Utopia. It has just as many problems as Fiat money.
And whether it is Fiat or gold-back, monetary systems of any type are only as good as the confidence people have in them.
Regards,
Ron |
