The Current Financial Mess

The current financial mess is some one's fault, right? Well, let's consider, first, that the ramifications are now being felt world-wide. As Asian and European markets begin to drop and become unstable, we all should realize the power of the American market. The first neat answer is yes, many are at fault, but then, the answer gets complex. Let me explain.

First, let me clarify that I am no financial wizard, but I am concerned about what is taking place in the financial industry, and what has taken place in general society, and I believe the two are linked.

All we hear, these days, is this idea that mark-to-market accounting has to be eliminated. Before we eliminate it, I would like to know what it is? I did a little research and share with each of you what I found.

Mark-to-market is an accounting methodology of assigning a value to a position on an instrument based on the current market price for that instrument or similar instruments, well before it matures or expires. There are two problems my simple minds sees: first, what prevents anyone from assigning a higher value than market value especially, if the current market value results in net lost profit?

Second, this practice of mark-to-market has been going on so long, now, that there are bound to be many more, annually, who knowing overestimate ( a nice kind word) their market price in order not to take a loss. How do we police them, and how do we recover after we set parameters? I believe over the years, more loop holes and tricks have been discovered, and eventually, a good percentage of the market was being held up by the proverbial house of cards.

This issue, as I see it, is directly related to this idea that there is no god, and that, for the most part, people are good, and do not need Him. If we can not be trusted with out constraints, discipline and a police force, what makes anyone think we can trust anyone to assign a value to a commodity when the value assigned will directly affect the ability to make or lose money. This practice might have worked in a Christian or even ecumenical society, but in a secular self-centered society it was doomed.

There are current constraints in place however, case and point:

IRS Section 475 contains the mark to market accounting rule. Section 475 states that dealers that "elect mark to market treatment shall recognize gain or loss as if the property were sold for its fair market value on the last business day of the year, and any gain or loss shall be taken into account in that year."

In the end, the cause is not mark-to-market according to Joanna Ossinger of Fox Business. Ossinger states that, "Mark-to-market, which is part of fair-value accounting, simply means that companies assigning values to assets they hold must value them at current market levels. If something is trading right around $10, it’s given a value of $10, regardless of whether it was bought for $2 or $20."

What happens if it is given a value of $20 instead of $10? Who oversees the process to ensure that companies value assets properly?

In the end, the cause is the same...we can not be trusted without the guiding light and indwelling presence of the Holy Spirit. Join me in praying for this financial crisis... that it will end quickly, and that it will move many to reconsider the meaning of life and put their trust in the Lord Jesus, as He is the only way (Acts 4:12). Blessings!