What a week. Lehman is bankrupt, Merrill is sold to Bank of America, AIG is more or less government owned, Russian stock market was closed three times during the week, China up 10% yesterday. It is definitely a roller coaster ride.
At least now that the short term problem is gone: Financial stocks are back up: most big banks are up 20% – 50% yesterday. The US markets was up 3-4% on both Thursday and Friday.
On the other hand, this time the peace comes from an unprecedented intervention from governments all over the world. The US government selectively bail out AIG but not Lehman, FSC in the UK prohibits short selling in financial stocks, Chinese government pouring in money to buy shares of Chinese banks.
Where is the spirit of free market? It seems like Marx is actually right: capitalism will actually lead to destruction. Even the US, supposedly the freest market of the world, is practising some type of modified communism. For the protection of the proletariat, since there are so many people in the US having AIG insurance policies, the US has decided to step in and offered a loan of US$85 billion and the government has an option to own 80% of the new AIG.
We can definitely see that the financial world is becoming more regulated from now on…
