I stumbled upon an article describing the beneficial impact of the SEC on the securities market. What’s the catch?

анонимный вопрос

Among libertarians, a certain consensus has generally formed that the Great Depression was caused not by mythical market failures, but by the fact that the Federal Reserve, created in 1913, pumped the American economy with money, creating a financial bubble. Subsequently, President Hoover, and then Roosevelt, did not allow the bubble to deflate peacefully, but began to steer the economy manually. For instance, as early as 1932, Hoover demanded that exchanges limit the ability to open short positions, and Roosevelt, in 1934, established the SEC—a federal agency that interferes with the free trade of securities.

The article states that the SEC ensures confidence in the securities market because it requires companies listing their securities on exchanges to fully disclose information about themselves.

In 2018, there was an ICO boom. A huge amount of dollars were spent buying Bitcoins to buy Ether with those Bitcoins, and then to invest in tokens created on its blockchain. The SEC did not regulate the process at all; most of the investments proved to be failures, but some things took off, and some will certainly take off in the future.

What does the ICO boom, during which token sales of millions of dollars occurred in a matter of seconds, tell us? That there is also a high demand for high-risk investments. An investor does not need some office to decide what to release onto the market and what to keep out. He only needs to know which assets are high-risk and which are relatively safe, and then he will decide for himself what to take. In other words, market demand is not for a regulator, but for rating agencies and good arbitrage. But the state, of course, cannot help but spoil things here as well, because, as we remember, the 2008 crisis happened precisely because, as a result of government pressure, the largest rating agencies assigned the highest reliability ratings to derivatives backed by junk bonds, and no SEC saved the day.

In conclusion, I would like to recommend Rothbard’s book “America’s Great Depression”, which provides a detailed theory of the economic cycle and analyzes the beginning of the Great Depression in light of this theory.