Pajamas Media

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We don’t need bad regulation, we need better regulations. Author is in fact proposing a way out of the current losses by possibly creating another bubble.

Financiers will be making more money, public will get less information on the companies real situation.

By the way, here is a very good source that will give you an understanding of world liquidity growth. You have to give them email though when register:

http://www.mckinseyquarterly.com/article_page.aspx?ar=2100&pagenum=1
The continued growth of global financial assets

The full fallout from the credit market volatility of 2007 remains to be seen. But over the longer term, the volume of global financial assets (the value of all bank deposits, government debt securities, corporate debt securities, and equity securities) will continue to expand. Over the past 25 years, through stable and stormy times alike, financial assets have grown robustly. In 2006, their value rose to $167 trillion, from $142 trillion the year before—a 17 percent increase, more than double the average annual growth rate (8 percent) from 1995 through 2005.2

For many years, as equity and bond markets thrived, bank deposits have accounted for a shrinking share of total financial assets. That trend continued in 2006, but the rate of decline slowed because the absolute value of bank deposits around the world jumped by $5.6 trillion—twice the average increase of the previous three years.3 The largest contributor to this rise was the United States, thanks largely to strong income growth and the housing boom, which enabled many households to tap their home equity for quick cash. This source of growth was shaky by 2007. Looking forward, the growth of deposits will depend to a large degree on China, where they are the primary savings vehicle.

Ever-deeper financial markets

Financial markets have been growing faster than global GDP for many years. As a result, financial depth, or the ratio of a country’s financial assets to GDP, has been increasing consistently across all regions. This deepening makes markets more liquid, improves access to capital for borrowers, helps to price financial assets more efficiently, and increases opportunities to share risk. In 1990, only 33 countries had financial assets whose value exceeded that of their respective GDPs. By 2006, this number had more than doubled, to 72 countries; Brazil, China, India, and Russia rank among those with financial assets worth far more than their gross national products. In 1990, only 2 countries had a financial depth exceeding 300 percent; 26 do today.

Several mechanisms help to deepen financial markets. One is the issuance of more publicly traded equities, as happened over the past decade with the privatization of state-owned companies in Western Europe, as well as in China, Eastern Europe,4 Russia, and other emerging markets. Another is the issuance of corporate bonds or asset-backed securities. In addition, bank deposits can swell with the growth of incomes and the appearance of new savings products, such as certificates of deposit and money market accounts. Rising equity values from stronger corporate earnings make markets deeper as well. Finally, rising asset prices and government debt can also have that effect. In 2006, with assets worth roughly 3.5 times world GDP, global financial depth increased to an all-time high. Nearly half of the increase came from growth in equities, largely the result of higher corporate earnings rather than increased price-to-earnings ratios.