Why It Sucks To Be A Regulator Right Now Part 2
Furthermore, there are serious implications to simply banning people from accessing opportunities to trade/speculate/invest in markets, and that is, they never get to learn!
Because they never get to learn, they cannot acquire the skills needed to let their money work for them, which is the idea that the establishment so fervently sells to the masses.
This virtually guarantees that retail will lose their shirts in markets.
Think of the overly paranoid parent that wraps their kids in a germ free home environment. The kid’s immune system never has to fight, never learns, and thus never adapts. The kid steps out of the house… and bad things happen.
Same thing with people in markets; the best way to learn is to lose money. It is after all, a capitalistic society, and what is capitalism without the taking of risk?
Additionally, by locking retail out of risk taking, regulators are also locking them out of earning decent returns. Locking retail out on an arbitrary measure like net worth does not do them any favors because they never have the chance to access decent opportunities.
Risk and return, are at the end of the day, two sides of the same coin.
On a systemic level, limiting retail to only certain parts of risk taking in capital markets means that retail wealth does not have as good an opportunity to grow.
This is a precursor to growing inequality as most retail folk do not earn enough in wages to be able to grow wealthy, much less to fund their own small business as a way to become wealthier.
In this sense, limiting retail access also means limiting their ability to better their social and economic conditions (from a monetary standpoint). But, what is a capitalistic society where less wealthy folk are prevented from becoming more wealthy on the basis that they are not already wealthy?
It’s a powder keg, that’s what.
Now stand in the shoes of regulators for a moment. On one hand you have a policy of disallowing retail from participating fully in capital markets, which is at best, poorly executed.
On the other, a raging retail mob egged on by factors entirely out of your control.
When the BubbleMania ends badly, because it always does, there will likely be a good chunk of retail investors (yes, those your policies were trying to protect) turning on you and accusing you of not protecting them more.
Also, the entirety of Capitol Hill will be making a sport of throwing you under the bus even though some of those same politicians fought for retail to continue trading the BubbleMania in the first place.
Oh irony of ironies, what can one do but weep?
It truly is a bad time to be a regulator.
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