The current woes on the financial markets are making me think about the people who run merchant banks. Do they really think they are doing a good job or is it all just bullshit? Either way you have to worry.
Securities are based on trust. Effectively a security is a promise to repay money with interest. When you buy one of them you have to trust that the person you bought it from will pay the money back. The problem is that if they don't there is very little you can do. You can sue them but that will just make money for the lawyers. At least in Australia, the regulators are totally useless so your on your own.
The boards of financial institutions have effectively been paying themselves huge salaries to take these risks with other people's money. Compulsory superannuation means that we are all forced to give our money to these people. If they don't know what they're doing why are we doing this? If they do know what they're doing why have they lost so much money?
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