The beer game and world markets...

Few days back I came across this extraordinary experiment of Beer Game done at MIT; described beautifully in the Fifth Discipline by Peter M. Senge.

Simultaneously, some extraordinary events have happened in the recent past, which seem to be of major significance for our near term future. Here is some reflection on what seems to be happening around us and connecting it all with the bear game.

• The first and the foremost observation is the rate of devaluation of Bear Stearns; a phenomenal fall of the share value from US$ 170 to US$ 2.
• The second observation is the rate of devaluation of US$ against Euro.
• The third observation is the rise of petroleum crude price.
• The fourth observation is the most recent news that speculators may now be targeting the commodity markets.
  

Is there a common pattern or theme binding all these events ? There can be many interpretations drawn out from these:

• The so called free market system seems to be in control of speculators with substantial financial muscle.
• The prices are no longer determined by the demand and supply situation. They are now determined by sentiments and news.
• The game is now being played at the global level; where few traders determine the fate of millions of underprivileged.
• Moreover, as the Bear Stearns case demonstrated, the assets and profitability for many corporations may just be on paper, hidden from the view of an average investor by complex accounting transactions.
• The feedback loops are missing as demonstrated by the rise in prices of petroleum crude.

So, we seem to be living in bubble economy where is the size of bubble is determined by the perception of the observer and not the real value of the object under question. It also looks like that in the so called free market system; the rich and the powerful (people and corporations) are cornering the majority of wealth created and this seems to be true across the globe...

To conclude, we are definitely heading towards economically difficult times, unless the markets correct themselves through a miracle. This is not to say that we should be going back to the times of rigid government control, but some kind of intervention by the governments of major economies is surely desirable.