About the author

Jacob Wolinsky

Founder and CEO of ValueWalk.com (the “Site”) is a web site owned by VALUEWALK LLC, a New Jersey limited liability corporation. I am the former VP of business Development of SumZero, LLC, the world’s largest community I have prior experience in a value based pe firm focused on PIPE transactions in micro-cap companies, and at a value based research firm, which focused on smid caps.

  • Rob Bennett

    Thanks very much for sharing your thoughts, Chipper.


  • Chipper

    It’s a nice idea, but good luck trying! How do you get people not to be envious when the dot com bubble is zooming up?

    I would argue that the cause of every single major stock market bubble and crash over the last 100 years is the Federal Reserve. The Federal Reserve is actually the first institution of central planning in the US. The Fed causes money for loans to be more available. Banks have always had a hard time controlling themselves from making risky loans when they had no one else to lend to. Some of that money ends up in the stock market. This causes a bubble.

    The Federal Reserve has had a strong hand in every single stock market bubble and crash. 1929, 1974, 1982, the dot com bubble in 2000, and 2008. In 4 of these cases, the Fed lowered interest rates for prolonged periods of time, causing people to have more borrowed money than they knew what to do with. Some of this money found it’s way into the stock market, causing temporary artificially high prices. In some of the crashes, the Fed actually worsened the effects by making money harder to borrow.

    Should the Fed be abolished? I don’t know. Is it going to be abolished? I don’t think so. Why? Because how could you abolish the Fed? The US government increases the “money supply” about 7% a year on average by “printing” money. If that money stops coming in, which expenses does the government cut? Which taxes does it raise? Both are not popular. So I don’t think that the Fed will be abolished unless someone comes up with a better way for the US government to print money.

    As for financial regulators in general, many people would say that regulators should not be allowed to make up the rules as they go along. Unfortunately, those people are not in power now. (See the book, ‘The Road to Serfdom’ by Hayek – it should be required reading for every American).

    However, fair financial laws may be a good thing. In the original (and maybe still the best) pro free markets book, ‘The Wealth of Nations’ by Adam Smith, he actually argues in FAVOR of FINANCIAL regulations. Banks have always had a tendency to collapse otherwise, even without the ‘help’ of the Fed.

    Some sensible financial laws that apply to everyone equally, can be a good thing. (For example, in Berkshire Hathaway’s 2008 Letter, Mr. Buffett explained how they avoided most of the sub-prime crisis (even while lending to people with very low credit scores) by following a couple of simple rules for their mortgages.

    If financial laws would be made years in advance before they actually take effect, they would have a shot at being somewhat sensible, and with a longer-term focus. Such a system should lesson the need for lobbyists to get involved, it would therefore have less politics and less favoritism.

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