Finance’s bad habits are still there

November 08, 09 by Mark75

While many people rejoice of some good economic data (especially in Europe), there are still several doubts on sustainability of this (little) recovery (also if we put aside data such as US unemployment). In fact, these results may be caused by something different from a reorganization and an healing of financial markets (that was what was needed), but instead it could be caused by the worst financial practices, that lead to the current financial crisis.

  • Financial markets are significantly “doped” by carry trade (investors borrow low-yielding currencies and lend or invest in high-yielding currencies): ZIRP policies de facto undertaken by Fed allowed this. And Nouriel Roubini notes that, if we keep into consideration dollar depreciation, real US rates for carry traders are even negative.
  • One of the main “cures” for finacial crisis had to be a broader regulatory protection of economic system. The Big Picture points out that in fact there is an “hidden” de-regulation in progress. For example, accounting requirements of Sarbanes-Oxley are being watered down. “The aggressive lobbyists are pushing for less transparency, less accurate reporting, less accounting oversights“: “If we really wanted to just help small companies reduce their reporting burdens and maintain acceptable financial controls, how hard is it to exempt an appropriate number of firms with modest revenue“. Actually, this is a reasonable criticism: it’s quite easy suspect that if a company has a benefit from more relaxed accounting requirements, this is because they wouldn’t comply with them.

www.banknoise.com [http://www.banknoise.com]

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I cattivi vizi della finanza non sono andati persi

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  1. diggita.it Says: 08.11.09 at %I:%M %p

    I cattivi vizi della finanza non sono andati persi…

    Alcuni analisti sostengono che i buoni risultati avuti dalle delle borse fino a qualche settimana fa, siano dovuti più a ripresa di pratiche speculative che risanamento reale. E la maggiore trasparenza sembra rimasta solo sulla carta….

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