T R U S T

TRUST - This five letter word is the basis of every activity (financial or other-wise) taking place on this planet. Whether we believe in it or not, it is still the bedrock of societies.

In Banking and Finance, it is more obvious because "banks lend long and borrow short" So whatever the technical reason (in the present financial crisis, the reasons are quite a few including easy monetary policies, emergence of China, savings from developing world into developed world, crooked rating agencies, regulators playing catching-up, emergence of technology, last but not the least - greed etc...)for the present crisis, the basis of it is 'LACK OF TRUST'

The obvious solution to this problem is to create conditions to rebuild the trust. One cannot, I insist cannot rebuild the trust by hoping the crooks will reform. This just doesn't happen. One can only rebuild the trust by separating the crooks from the good and then creating a level playing field. (In banking parlance, this means, know the exact position of each bank/financial institution and let the weaker ones go down) Ofcourse this will lead to some short-term intense pain, but it will help to bring the good one's together and create a stronger system for the good of all. And it will be quick & efficient as well.

What then are the great minds across the world doing to solve this problem? They are, in my opinion 'falling in the trap' of 'hope' rather than playing it straight with action as a basis. They are assuming that putting good money (to begin with, 3-4 trillion dollars) behind bad without separating the good from the bad players will rebuild the trust. This is where I believe, they forget the basics. The trust is not built upon money, it is inherent till somebody disturbs it. The only way to rebuilt it is by separating wheat from the chaff. Let the crook banks & institutions go down.

This is not just basics & common-sense but it's the truth. But how so many great minds come together in a room and still take so many stupid decisions is beyond my grasp. It reminds me of what Warren Buffet said once in his MBA Talks 'Why Smart People do Dumb Things' - Ex: The 16 genuinely genuises in 'Long Term Capital', to make the money they didn't have and didn't need they risked everything they had and they need. And that's foolish. Just plain foolish.
http://in.youtube.com/watch?v=C1LiATYSajw&NR=1

Pradeep Kabra