Wisdom-Seeker

My Way or the Highway?

The best part is that Merton's theory doesn't adequately account for the long-tail outliers in the distribution of probable events -- which are caused by both the "dynamic, regime-centric, transient and savage" behavior of the market participants and the realities of life in the chaotic system we call Earth. So we're effectively all driving around in a car with "Black-Scholes-Merton seatbelts, airbags, ABS and 4WD", except that it turns out none of those work when the 100-year storm comes (every 10 years or so in fact). So the whole market gets caught in an enormous pileoup out there on the road of life. And while the bankers suck enormous profits out of the system during the good times, when that storm comes, the taxpayers, unless they fight back, get stuck with the bill.

Private gain, socialized pain is grossly unfair and threatens both capitalism and democracy by encouraging moral hazard. The handout to save Bear Stearns may be only the beginning of a long slippery slope to higher taxes for all, fascism, or worse. Fight against it! www.financialpetition....