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What is the purpose of government intervation? -- Death of free market?
What is the purpose of taking steps into the market for a government? According to the USA government's recent statement, that is to stabilize the financial market. But from what we observed in the past, the government intervention did not necessarily restore market's confidence and stop falling trend of stock market. In fact, if you look at the volatility Chart, government intervention only spurred the volatility of the financial market.
Recently, the USA government brought two Christmas presents to shareholders of Citi Bank and three Automakers. The market, again, became more turbulent. I have no idea whether the intervention can bring prospects back to USA or not. But the government's action has already stabilized the volatility at the high level or ever higher. If you treated volatility as risk of investment, from experiences in the last one year, the government intervention only brought huge risks to your investment portfolio instead of long term investment profit. The government intervention slows down the process of price discovery, prevents the efficiency of the free market and brings chats to the market.
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发表于 2008-12-9 05:59:00
