reading a piece by paul krugman in the op-ed section of todays IHT led me to think about how investing has evolved around the world in recent years for the average middle class person.
the culture of stock market investing has been a direct beneficiary of the increased exposure of people to 24 hour financial channels, commercially oriented exchanges with hefty marketing budgets and vanity for better or for worse. its become a matter of pride to say one owns 'investments' here or there even thought they are very little understood.
regardless of the reasons for the increased allure and exposure to stocks, statistics have repeatedly shown that the participation of people in equities will only continue to increase. Krugman argues that non-depository institutions in the US have continued to be exempt from much regulatory oversight that has been a part of the conventional banking (deposit taking) institutions since the great depression with the enactment of the FDIC and contingent controls.
even though I am not a fan of regulation as a fail safe measure, I think that enough 'average' people that would traditionally have kept their savings in a bank or similar fixed income instrument now consider the stock market to be a viable and comparable option with the little concern for the excess risks involved. Of course over the long term the stock markets move gradually upward but in quite a lumpy way and as a whole - two principles that the aforementioned 'average' investors do not seem to follow. in fact, if anything, they seem to want to trade daily and with concentrated bets mirroring a casino mentality.
normally I would say they deserve whatever they get themselves into but, given that the ramifications to society could be severe, we must consider providing a level of oversight and regulation to avoid having the whole pay for the few and massive government bail outs at the expense of the taxpayer. america will eventually come to terms and figure it out but it could take a while and require committed leadership not present in the current outgoing administration.
in kuwait we have seen the disaster that is due to lack of firm and clear policies for dealing with sociocommercial disasters in the souk almanakh crisis of the early eighties. this was a disaster that crippled a generation and whose impact is felt more than twenty years later. imagine the same thing in america but with consequences the world over.