Monday, April 4, 2011

Who is to blame?

Sometimes it makes me wonder, what does "Financial Engineering" really mean? While real engineers build products that in some way adds value to make every day simpler and productive, what lucrative products do the so-called engineers in Finance make that entitles them to so much more wealth? I guess it is probably all an illusion at part or more so our ignorance in understanding the products, primarily because they are very complex instruments to hedge risk. There is math, computing, finance and other permutations and combinations blend with some phd brains, economic perceptions, and more theory.

But again, why did not these complex products hedge risk in the securitization food chain? Although these products may have found ways for growth beyond means, there were no boundaries and that has brought us to the point that we are at today. Housing markets still stagnant, government debt at peaks, quantitative easing and GDP growth leisurely reaching levels that would bring an improvement in unemployment.

In retrospect, I was part of an Engineering project for community service during my undergrad where our group designed a bicycle powered generator for middle school kids to understand and observe the physics beyond the functionality. We were amazed at our creation - we created a product beneficial to a community. Similarly, the creators of these products are genuinely excited at what they make  but I guess  it is for the users of these products to distinguish between "too much" and "just enough."

- Soujanya

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