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It's Going to Get WorseIt's Going to Get Worse

Half a century ago, the economic historian Karl Polanyi argued in the classic book The Great Transformation that self-regulating markets never work and that government intervention always becomes necessary to prevent catastrophe. Buried toward the end of the book is a short but succinct sentence that describes much of what we are seeing on Wall Street today: The financial market governs by panic.1

Michael E. Lewitt

July 1, 2008

19 Min Read
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Michael E. Lewitt

Half a century ago, the economic historian Karl Polanyi argued in the classic book The Great Transformation that self-regulating markets never work and that government intervention always becomes necessary to prevent catastrophe. Buried toward the end of the book is a short but succinct sentence that describes much of what we are seeing on Wall Street today: “The financial market governs by panic.”1

The first half of 2008 saw plenty of panic as investors and regulators scrambled to deal with unprecedented losses and the collapse of a major investment bank. Polanyi’s view is echoed today by George Soros, one of the most successful investors in history, in The New Paradigm For Financial Markets, a book published in May 2008...

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About the Author

Michael E. Lewitt

Mr. Lewitt has spent the last 25 years in the securities industry and the last 20 years in the investment business.  Mr. Lewitt co-founded Harch Capital Management, LLC in 1991, where he was the co-lead portfolio manager (1991-2001) and lead manager (2001-2011) for all of the firm’s client assets including separate accounts, hedge funds (long and short), collateralized debt obligations and mutual funds focused on the less-than-investment grade debt markets for U.S. and non-U.S. institutional clients as well as high net worth individuals, family office and foundations and endowments. Since 2001, Mr. Lewitt has edited and authored The Credit Strategist, a newsletter that covers economics, politics and the financial markets and that is widely read around the world.   Mr. Lewitt is recognized as one of the few investors and strategists who accurately forecasted and successfully managed client assets through both the 2001-2 credit crisis and the 2008 financial crisis.  Mr. Lewitt serves as a regular financial columnist for the Spanish newspaper El Mundo and has written for The New York TimesThe New RepublicTrusts & Estates and other publications.  In May 2010, Mr. Lewitt published The Death of Capital:  How Creative Policy Can Restore Stability (John Wiley & Sons). The Spanish edition of the book, La muerta del capital, was published in June 2011. Mr. Lewitt graduated from Brown University (Magna Cum Laude; Honors in Comparative Literature and History); was a PhD candidate in Comparative Literature at Yale University; and graduated from the New York University Law School (J.D.; LLM in Taxation).