Thursday, February 26, 2009

Getting it Right Next Time

From Morgan Stanley Asia research:

"But now the party is over—and painfully so for a world
in recession and for markets in chaos. The task ahead is to
pick up the pieces, learn the lessons of this crisis, and take
actions to insure these types of problems never occur again.
The post-crisis fix can succeed only if it is grounded in the
premise of shared responsibility. A targeted politicized fix
is not a solution to a systemic problem. Fix the system that
gave rise to the crisis—not just the banks that have defined
ground zero of a wrenching credit crunch. The piecemeal
prescription of the blame game virtually guarantees there
will be a next time—an even bigger crisis that deals an even
tougher blow to market-based capitalism."

Stephen Roach, Chairman of Morgan Stanley Asia, great financial thinker and earner of about $500k per year did not proclaim the end of capitalism, but is worried about it.

With any crisis, a government has an obligation to fix the problem to the best of its ability and on opportunity to fix the system so that the same problem, or worse, does not happen again. Thinking about the last decade, poor business practices, poor consumer behavior, poor legislation and poor regulation got us where we are today. Let's fix that. Thinking about the last century, lightly
-regulated capitalism in an environment of the most efficient capital markets in the world made the U.S. the dominant economic force that it is. Let's keep that.

If we can't fix the current problem while at the same time preserving free markets, we're really screwed.

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