Much rhetoric today is focused against “Wall Street”, bankers, hedge funds, and speculators. People are upset about the effects of the Great Recession, but are often misguided about the causes. I submit the idea that the foremost cause of the Great Recession was the business cycle (or economic cycle). If we are to blame the people and institutions behind the business cycle for the Great Recession we must also applaud them for the periods of growth between recessions. To one degree or another we are all participants in the business cycle.
Of course, there have been behaviors ranging from ethical violations to fraud, particularly in the arena of mortgages and mortgage-backed securities, and (MBS) credit default swaps.
While there are flaws and imperfections in the US financial system, the accomplishments of the system deserve some attention. The United States represents an economic marvel of the 20th century and 21st century financial achievements of the American financial system. Like Rome, the United States incorporates the best of other systems. The stock exchange did not originate in the United States, but the US and Europe improved upon it. To the best of my knowledge, the index fund and the ETF both originated in the US.
Right now, today, US investors have access to:
- Low cost online brokerage accounts. It is easy to find brokerage accounts that charge less than $8 per trade and have a list of commission-free ETF trades. With effort, it is possible to find accounts with trades costing less than $5, or even lower.
- Free stock and ETF market data. (For example Yahoo! Finance and Google Finance).
- Superb ETF offerings. (SPY, VTI, SCHB, BND, VEA, VEU…)
- Excellent order fulfillment and pricing (with most brokers).
Just imagine a world without stock exchanges. Could you imagine placing a classified ad or holding a garage sale to trade stock certificates? Ludicrous, right?
The current US financial system is indeed a modern marvel. English, Canadian, and European exchanges have been similarly efficient and successful. Other exchanges around the world are playing catch up, and doing so quickly.
The global world of finance is constantly evolving, but as of today the options available to US investors are quite spectacular. We are wise to take advantage.