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Comment by russell | Hacker News Reader

No they can't. They are so anxious to beat their quarterly earnings estimates and get their bonuses that they will invest in anything that pays an extra quarter of a percent. Hence the huge losses in the 70's from investing in South American dictators, the savings and load crisis of the 80's, the Mexican devaluation, the collapse of the ruble, the Japanese real estate collapse, the southeast Asian collapse, the current derivatives mess.

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The problem with investors in the developing world is that investors have always had a not unreasonable expectation that if anything went wrong, someone would be there to bail them out. Someone almost always had - whether it be the World Bank, IMF, or some other organization - and I suspect at the end of the day, we will see some form of bail out by Abu Dhabi. To worry that this sets a horrible precedent ignores all the previous examples you point out.

If we started to allow some of these countries to see the consequence of their governance, perhaps we would see significantly better governance. This has as much to do with investors as it does with the governments and multilateral organizations that enable them.

this is actually partially true. A lot of the investors that are putting their money in dubai and the emmirate states do believe that these countries and investments will not fail and the world community will not let them fail. The reason being these places are suppose to be the model for whole islamic world. Showing a vision to the whole islamic community of what is possible when there is strong economic relationship with the global community and the westernized world. A huge catastrophic failure in these areas will greatly hinder globalization in the middle east.

So you're suggesting that despite years of education and learning from mistakes, investors never learn from their past mistakes, and that all of these crises you mentioned are exactly the same thing?

This could make sense if you're talking about currency arbitrage, but investing in entire sectors of a nation is different from trading tenths of a cent of a dollar.

So you're suggesting that despite years of education and learning from mistakes, investors never learn from their past mistakes, and that all of these crises

Well, given the words "all of these crises" ... you tell me, do they?

I think you're suggesting that they're all the same.

No two historical events are ever identical. But these crises do have things in common. For one thing, they're all crises. For another, the people who benefit the most on the way up (bankers, brokers) are not the people who suffer the most on the way down (taxpayers, working poor, newly unemployed). That asymmetry, I think, has a lot to do with it. Investors have learned, yeah, learned how to game the cycle by externalising the losses.

>So you're suggesting that despite years of education and learning from mistakes, investors never learn from their past mistakes

Investors learn that the best bets are betting on being too big to fail, or being risky as possible to get a massive short term profit and then retiring. (Or alternatively, being hired to clean up the mess you made ala Geithner)

These are human beings working for corporations. They have limited liability. They get no benefit by being safe, but have all the incentive in the world to do stupid things that will make several million in bonuses today.

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