Our view:
Medicine or economics. It is always easier to cure a disease by analysing symptomatic evidence. The problem begins when medicines don’t work. One way is to follow the same methodology and inject higher doses, a higher class of antibiotics, steroids et all. It is only when the higher doses fail that we start looking for alternative therapy.
The broad band antibiotics used today are based on analysis of symptoms and not the root cause analysis that the practitioners ayurveda use. Though it cures quickly it does not attack the “cause” of the problem, and at times fails. Ayurveda and nature cure, yoga and jogging are all cause based therapies that lead to elimination of the root cause of the disease and ill-health and are not “effect” based cures relying on symptomatic evidence .
The solutions are similar in economics. Symptomatic evidence of mortgages going bad during the eighties that caused several bank failures lead to the establishment of Freddie and Fannie. They injected liquidity into the faltering U.S. housing sector, helped create a sub prime mortgages market that initially seemed to work and stabilise the housing sector and even raise the market value of the mortgages. Though the value of mortgages grew, the failures to pay for them did not go away. This resulted in more Bank failures. As per a FDIC report 1600 of Americas Banks ( almost 9% ) failed during the period 1980 to 1994 writing of $ 200 billion of assets. Hence it was becoming increasingly clear in the nineties that the higher dose of antibiotics injected by Freddie & Fannie into the housing mortgage sector may not ultimately work as the Bank failure rates were increasing.
Investment wizard Warren Buffet foresaw that these complex derivatives would multiply and ultimately collapse due to toxicity. As early as 2002 he had warned that these derivatives were financial weapons of mass destruction. A message that people chose to ignore principally due to the bull run in the real estate sector and stock exchanges. That Freddie & Fannie would themselves collapse under the weight of toxic assets in a few years time was beyond imagination despite Buffet’s warning …… It was a rare case of doctors catching the disease.
As the higher dosage of antibiotics failed to stem the disease, the viral toxic assets spread its tentacles engulfing not only Freddie & Fannie and the derivatives industry but even Citibank, AIG and many others worldwide. It is now an epidemic that could spread further, destroy much more than we can imagine today. The question is how to stem the rot.
Should we attempt to go for yet another higher dose of antibiotics or steroids as the Fed or the Treasury is now prescribing. The private public partnership of toxic assets by which private ownership of the assets is encouraged to help the banks get rid of them. Or should we try alternative therapies that attack the root cause of the problem that purge the toxicity and help rejuvenate the system like yoga. Or should we mix both techniques to control this spreading epidemic. We need to find out….perhaps with help from Buffet, Forrester & others.
This is our opinion
We could be wrong. Tell us if we are & why? We encourage diverse opininon
even if it is from commercially interested groups opposed to our thinking.
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