ERRONEOUSLY FUNDED ECONOMIC THEORY HAS ALLOWED VULTURES TO GROW BIGGER THAN CARRION.
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Hedge funds and traders of exotic financial products could be under stricter governmental supervision, U.S. officials say. And to give a list of obvious measures, such as registering with the SEC, etc.
Besides the obvious propositions of the Obama administration, the following should be done:
The mathematics of the entire derivative market should be changed so that it can attenuate perturbations to the system, instead of augmenting them as it does nowadays.
In particular non commercial operators should see their leverage severely restricted.
Trading limits should be put on anything that is traded, to provide a speed limit similar to the speed of light in physics. This way information could reach all market participants equally and not just the first responders and professional manipulators. [Modern technology would allow to do this is in a fair and efficient manner.]
Another way to limit speculation would be a tiny tax on any transaction.
The rights of CEOs to sit on each other's boards should be limited. Not doing this creates a CEO class, a subset of the plutocracy. [Maybe union representatives should be sitting on the board, as in Germany]
Countries should be required to pay their way. In particular the USA, should raise taxes on consumption of good and energy to become self sufficient financially, instead of having dubious feudal arrangements with non democracies to pay tribute (an allusion to China). This is no good for all parties involved, and condemns democracy, for all parties involved.
Legend has it that hedge funds and private equity using tremendous leverage provide "liquidity". Whatever that is. what we see in this crisis is that they provide inextinguishable debt.
In general the argument could be made in serious economics that, ultimately money represents energy. If this is true (and it is), money should be finite in amount. The fundamental error that caused the present crisis is not to have believed that this was so.
Thus, as the highly leveraged hedge funds and private equity grow, they take energy OUT OF the rest of the economy. Hence their leverage should be seriously constrained, and made to vary according to the public utility of what they invest in (For example, more leverage for green energy investments).
More details and justifications are found in: "Reforming World Finance", November 28, 2008, http://patriceayme.wordpress.com/2008/11/
Patrice Ayme
patriceayme.wordpress.com
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