Does free market mean privatise profits and socialise losses?

Politicians, financial experts, and economists from the developed world (and even our own self proclaimed God of capital markets from CNBC TV18) always preach us about free markets. However, what they practise is exactly oposite. On more than one occassion US government has intervened in the form of bail outs of large financial institutions instead of letting them fail:
- JPMorgan, Fed come to rescue of Bear Stearns
- U.S. seizes Fannie and Freddie
- Fed bails out AIG with $85B loan

Are "free markets" a myth and just an impractical theroy? I was wondering whether contrary to the generally pereceived notion that Capitalism is a superior economic theory (compared to socialism or communism), whether there is any single good or bad economic theory in absolute terms. The recent events in US suggest that actions of the US government were not in line with the principles of free market. Government intervened and supported financial institutions at the cost of tax payers' money instead of letting the financial institutions on the wrong side of the market fail. Those who have suffered in this mess are gullible retail investors, employees of failed institutions, and taxpayers. While top managements, credit rating agnecies, and regulators have been spared. Some US analysts and economists are pointing out that US has manipulated its key indices to wrongly reflect the health of the economy. Read this: Wall Street: The dark theory

Socialism and Communism are considered to be inferiror to Capitalism. But may be they are as good as capitalism and the problem was with their faulty implementation just as in this case. My question is whether is it a wise governance and economics for developing countries such as India to blindly follow the free market economy in absolute terms and completely close doors on other economic theories.

Markets - US, China and India

From the highs of the last 6 months, US market has corrected by 12.26%, Mumbai by 15.58%, and Shanghai by 28.63%, do you still think, if US continues to be in the cold for next 6-9 months, China and Indian markets would flourish?

Politics of Migration & Side effects of skewed growth - Lessons from Mumbai

Over the last week the national media has given significant coverage to events in Mumbai. To a large extent, these events are undesirable espcially for a country crusing along the growth expressway. National media has criticised Raj Thakre, Maharashtra government, and Mumbai police for their actions and inactions. Raj and his party workers and deservedly so, have been criticised for their acts of violence against North Indians in Mumbai. However, such a huge media coverage has transformed Raj into a leader of marginalised and small regional party into a national figure. Thats suits Raj and his party for the upcoming elections municipality elections in Mumabai. Arrest of Raj Thakre is treating the symptom and not the root cause. I don't justify the attacks on North Indians in Mumbai. However, there is a problem of migrants in Mumbai.

For political gains and to marginalise Shiv Sena, Congress has systematically made attempts to change the demographics in Mumbai by encouraging North Indian settlements in Mumbai and transforming them into their vote banks. This has been done by illegally grabbing and encroaching government land. Not only incessant deluge of migrants in Mumbai strains existing insufficient infrastructure but also creates hurdle in improving the infrastructure. And no wonder the Mumabaikar at all levels feels marginalised. The poor middle class feels marginalised because he is loosing jobs to migrants and the middle class Mumbaikar is concerned because the city is simply decaying under the load of migrants in Mumbai.

What we need is inclusive growth. Growth of one class at the cost of others will always create social tensions especially in a society such as ours which is so divided by class, creed, caste, region, language, religion, etc, etc... Nandigram, Kalingar Nagar, and now Mumbai like situations cannot be avoided unless the basic issues are undressed.

In the last few days, I have heard ridiculous, frivolous, superficial discussions and debates on TV channels mostly by thinkers and analysts operating from their ivory towers. While there were references to constitution, right to work and move freely in the coutrny, there were hardly any discussions about issues arising out of migrant population, lack of growth in backward areas of the country, which causes migrations and solutions to these issues. There are lessons to be learned from Mumbai. We just can't leave events in Mumbai to Raj and his arrest.

India Outeperforms Global Markets

CNBC TV 18 keeps telling us that India will decouple from global markets. However, ground reality seems to be something else. Take a look at the adjacent chart. India did outperform global markets, unfortunately on the downside! What do you think, will the markets be in red in 2008?

Every Breath Bernanke takes...

An extremely hilarious parody of the song "Every Breath You take" produced by students of Columbia Business School.

Robert Glen Hubbard, who is the central character in the video is the Dean of Columbia Business School. A section of the media had speculated Hubbard to be nominated as the Chairman of Federal Reserve. Eventually Ben Bernanke made it to chairmanship. The video depicts Hubbard's supposed disappointment at not receiving the nomination to be Chairman of the Federal Reserve.

Enjoy!!!

Key Indices - How they moved in the last 12 months?

The table shows how key stock indices have moved in the last 12 months. China was the only exception to the fall in the month of Aug - Sep, while rest of the indices plunged downwards as Dow fell on the worries of sub-prime worries, Shanghai moved up by 21% in the same period. Markets such as India and HK had more than 2/3rd of last 12 months' growth in the period from Aug 16th to Oct 31st. This was primarily driven by liquidity due to lowering of interest rates in US. Shanghai seems to be running out of steam now. From Aug 16th to Oct 31st, it has has grown only by about 25% of its total growth of about 214% in the period Nov 1, 2006 - Oct 31, 2007.

Dow Jones and Sensex (Mumbai)

Will Mumbai stand-out and outperform its emerging market peers in the coming year? Or as global equities fall out of favour of US funds, will Sensex see major correction and period of consolidation in 2008?

Dow Jones and Shanghai

No comments!

Dow and Hang Seng

Very similar to India story! But will it stand on its own in 2008?

Dow and Nikkei

Expect turmoil in Nikkei in 2008!

Dow and FTSE

Expect the expected on London Stock Exchange!

Financial Markets 101

Enjoy this introductory course on Financial Markets from "the long Johns"



Source: Galatime.com