Anarcho Regulation

DeepCapture introduced a wonderful term "Anarcho-Regulation" to describe the current state of securities regulation.

I like this term much better term than "deregulation."

During the market crash of 2008, the world learned of an absolutely insane mix of derivatives and re-insurance that created a systemic fault in the economy.

I dislike using the term "deregulation" as most of these derivatives and financial instruments were designed to regulate the economy. For example, the credit default swaps that blew up were created by the massive Security Modernization Act of 2000 ... a regulation. Government backed re-insurance came from New Deal Legislation in the form of Fannie Mae and Freddie Mac. The Community Re-investment Act showed that Congress was pro-actively trying to tip the market toward social goals ... social engineering.

Most of the derivatives on the market today exist for the express purpose of regulating the economy. "Hedge Funds," as the name implies, weren't designed primarily as investment tools, but as tools to hedge investments. Short selling is justified with the claim that it enhances liquidity. Above all, insurance exists as a means of regulating risk.

Modern financial thinking has been dominated by a desire to regulate the market. What happened in the Clinton/Bush years is that the government realized that it was ill equipped to monitor the bizarre mix of derivatives that was being used in the financial industry. So, the Feds simply took their hand off the tiller with the hope that the market would magically reach a stable equilibrium.

I believe one should use the term "deregulation" to describe the removal of a regulatory machinery. What our leaders did in the Clinton/Bush years was to leave all off machinery designed to regulate the economy running at full bore ... but with no supervision.

The term "anarcho regulation" aptly describes a system where one leaves the regulatory machinery in place, but removes the supervision.

I applaud Deep Capture in their effort to reduce the abuses of naked short selling and FTDs.

The drum i wish to pound is one that reminds the world that short selling is a tool designed to regulate a stock. Unfettered naked short selling is best described anarcho-regulation. The deregulation would involve the actual removal of the regulatory machinery. Since naked short selling exists to regulate stocks, deregulation would eliminate the regulation that make naked short selling possible.