Free Market v. the Government?

Every once in a while, I am rather bemused by seeming contradictions. It was not so long ago that the entire financial system in the U.S. (and the world, for that matter) came to a halt because liquidity in the market dried up. Do you remember all the sound-bite in the news explaining to the mainstream what that means? Everyone was trying to explain why it was such a crisis and how we could enter into another Depression. The government took unprecedented steps by pouring money into the system, watching what letting Lehman Brothers fail do to the financial system, "bailing" banks out, and today, we hardly remember the panic that we felt.

So now that the crisis passed, banks don't want the government to regulate them. What's ironic is that when the banks were in trouble, they wanted the government to step in and pump the "financial system" back up. I attended a telephonic continuing legal education during that time, and the speaker was a financial consultant (don't ask how that constitutes continuing legal education). The presenter was absolutely adamant that the government had to step in because the market was in such systemic failure, that there was no way market could have corrected itself to get out of the crisis.

It turns out, that the free market may not be perfect in practice. Adam Smith's invisible hand may not guide the system away from major pitfalls.

So what would be wrong with allowing government regulation so that we can avoid such catastrophic financial crisis? There's the bureaucracy argument. And then there's the whole shouldn't capitalism mean free from the government intervention argument.

At the end of the day though, maybe it's not about having more or less regulation. Maybe it's about societal values and attitude. During the same time period when American financial institutions were getting inventive in creating "derivatives," "credit swaps," and a whole bunch of mechanisms to be called "securities" to work in a way that basically would allow no one to have incentive to take responsibilities, Canadian banks did not march down the same path. In case you forgot, while the rest of the world, modeled after American financial system, fell into the same crisis because of such exotic financial instruments, Canadian banks were the ONLY banks that did not need to be bailed out by its government. Why? Is it stricter regulation? Maybe it's the people that run those institutions and their attitude of taking the "conservative" approach of not investing in exotic instruments that didn't smell right. And maybe they decided that securities should be understandable and transparent... and those responsible for paying or investing, should remain responsible.

But that's just my guess (and guessing from what Canadian bankers said in the news around that time, that their culture is different). If people want to find loopholes, it does not matter how much laws or regulations are in place... loopholes will be exploited. If people want to play it straight, then it doesn't matter that there aren't additional regulations.

So at the end of the day, maybe the question isn't should the government regulate the financial institutions more. Maybe the question is how do we change the attitude and value of people running the system. And that may be a harder question to answer than imposing regulations...

Small v. Big Government

My friend and I got to talking about whether it's better to have bigger government involvement or less. It came up because my friend pointed out that more people are somehow connected to government involvement -- direct employment, indirect employment (contractor), beneficiary of some program, etc. -- these days than now.

After our discussion, I started thinking. What's the point of having a government, if it wasn't involved in our lives? The basic notion of having a government is that it was formed to do things for the people that we could not do individually. So government makes rules, protect the people, and enforce the rules. Since we all pay to the government, then don't we want government involved?

The alternative would be to live in a society with no government. Then, of course, there is no society. Every person for him or herself. Philosophers tell us that we would not want to live in such a place. I have no idea whether we would or not. However, in a place with no government, I wonder if people would naturally start coming together, start establishing some sort of rule (don't kill me I won't kill you, this plot of land is mine and all that grows on it is mine alone, etc.), and eventually government would spring up.

Just a random thought on how people actually would like it if there was no government...

Pants on the Ground

Ok. I had to treat myself while working after hours on bankrupty stuff. So I ended up watching American Idol, Season 9. You have to watch this YouTube video of this 62 year old man singing his original song, "pants on the ground." It made me laugh... along with all the judges. And Simon may be right.. it will probably be a hit!

Holiday Season

Although the moon was not actually blue, I celebrated the end of 2009 and coming of 2010 by getting a peak at the blue moon. Although a bit hectic, I did manage to have a get together with my friends for a little holiday gathering before the end of 2009. And this morning, I was in the mood to put on a han bok (traditional Korean clothing) to celebrate the New Year's Day with my family. And of course, we ate dduk gook (traditional Korean soup). Below are some pictures. I am off to celebrate the new year with some sun and relaxation in Maui... and maybe I might even get to see some turtles and whales!

Happy 2010!


Making merry wee into the night with friends.



The only time we get to sing Christmas songs are during the holidays. So, at my insistence, we sang some carols.


Another shot of the holiday gathering.


My sister doesn't like to be in photos (although I did manage to get one with her). My parents and me on 1/1/2010.

My parents celebrating the New Years Day.


And finally my mom and me. Han bok is pretty uncomfortable ... so as soon as the pictures were taken, I promptly changed. ;)