Today's Wall Street Journal has what I think might be one of the more elegant summaries of the market system's ebb and flow (with a focus on our favorite hand-wringing crisis of late, Bear Stearns). The bemused surprise that would formerly accompany a free lunch has turned into something like annoyed restlessness. Today, a free lunch is received with a look that says "what took you so long and where is desert?" Return is expected without the attendant risks. Enron employees screaming that they have been defrauded because they left their entire retirement savings concentrated in Enron stock. U.S. consumers calling for price gouging prosecutions because gas is "expensive." (They should try driving in Europe). Or, as the Journal's OpEd more sagely puts it (subscription required):
Financial bets gone wrong are not a crime. In fact, they are essential. Financial innovation has been a great boon to the American economy, but innovation entails risk, and risk means the potential for failure. The key point is that, when financial players step out too far on the risk curve in order to earn larger rewards, they are then allowed to suffer the requisite market penalties for reckless driving.
