One of the main ideas in my undergraduate class on investment was the balancing concepts of “fear and greed” as motivators for investment. My imagination still plays back this scene:
Dr. Martin - “The stock market is motivated by what…Mr. Ross?”
Me - “Fear and greed…”
Dr. Martin – “Fear and greed indeed”
People, by nature, want stuff, and in some cases that stuff can be purchased with money. This gives money value, and is the basis for all capitalistic economic theory. As with anything of value, money can be rented out for a fee to those who have a greater immediate need. This is call investment, and it is done to make more money, those with a surplus rent out (invest) their money. This is the greed motivator or the reason to invest; more euphemistically known as self-interest.
The problem with letting some one else use your money is simple. You risk that the money may not be given back. This is the fear motivator, or reason not to invest.
government openly admits that it regulates so that investors will have more confidence renting out their money which will stimulate business, and ideally make almost everyone (including the government) more money. They are decreasing the fear factor for people who want to invest. This promotes investment in things that most people never see or even understand because they feel comfort that the government has their back. U.S.
Unfortunately, these regulations give a false sense of security for two reasons. The first is that complexity in business and life makes it nearly impossible for these regulations to be enforced. Second, the creation of these regulations is influenced by powerful institutions simple seeking their own interests.The solution: remove many of the cumbersome, complex, and ambiguous regulations, and allow the natural fear of losing what you have to balance out the desire to obtain more. This equilibrium will promote personal investigation and responsibility which will encourage people to invest in what they know and in what they trust. This will challenge those seeking investment to be more transparent and more trustworthy if they desire those funds. When individuals struggle to make more informed personal business choices it produces a better economy, and builds a stronger people.