Wednesday, August 09, 2006


Since late nineties, world economy has been going through turbulent phase of extreme highs and lows, also called the bubbles (though not a recent phenomenon). More so after the Iraq war, when all markets started moving in one direction, defying basic rules of economics.

Big banks, hedge funds and financial institutions (the Blob) are employing the best brains available these days, and these brains in their quest have modified a game of raw money, which we have known as speculation for years, which generates quick money in quantum's without producing goods, services or jobs. The world of international finance has turned into a giant global casino where the Blob is the operator and greedy investors seeking quick profits are the players. Players make money either way the market moves and they make most when the markets are most unstable.

How it plays
The blob creates a small bubble in the market by pumping in big money within a very short period in order to attract investors driven by greed. As the players throng, a chain reaction is set and bubble starts to inflate. Now the Blob rocks and shakes the boat by withdrawing and introducing self in parts at regular intervals. Players enjoy every bit of it and the bubble takes in more riders during the lows inflating all the time. Faster the better, higher the better. Wild party is on. Riders are intoxicated with newly found booty. They want to have more of it. But the Blob is watching its target and once achieved, it pulls the rug out, busting the bubble and
setting them all into a free fall. The Blob is the big winner extracting huge toll from the players and leaving them shattered for rest of their lives.

The Blob moves on in search of yet another vacuum...

During and after the pull out a great deal of money, time and energy is lost by masses. The bubble creates a false euphoria. People start to spend mindlessly. Businesses get on to big projects with liberal spending. Raw materials, salaries, services and sundries go up creating inflationary pressures. But once the Blob is out with the booty, deflation and depression takes over. Projects are abandoned midway resulting in total loss of the investment. Whole economy is left in a turmoil with financially and psychologically wrecked masses, which takes years to get back on its feet.

As national economies become more liberalized and integrated, future financial crises are inevitable unless changes are made.

Thanks with due regards to Speculation

Speculation is an essential tool in economics, which adds to liquidity to the free market and make it easier for others to offset risk. Also, it makes future trading possible.