I agree that mark-to-market is a big mistake. In fact, it seems to me that a deeper problem is the so-called
"marginal revolution", where the "subjective value" is apparently determined strictly by the buyer. Murray
Rothbard was apparently so taken by this doctrine that he viewed Adam Smith's labor theory of value as nothing
more than a precursor of Marx. It seems to me that the subjectivists believe that cost of production has nothing
to do with price. I have not thought through how this relates to the fanancial markets, but I think the analogy
is apparent.
Concerning the sub-prime mess generally, it seems that Alan Greenspan is the major culprit, and he adds
crime to maladministration by taking a fee from Mr. Paulson, who made billions shorting the mess Greenspan
gave us. As an aside, it is impossible for me to believe Mr. Greenspan is an honest man when he claims to
be a disciple of Ayn Rand, and governs as anything but a lbertarian.

I have absolutely no financial background but have always believed it is important to live below your means and not get carried away by the herd instinct so prevalent in human activities. That herd instinct has led to today's financial difficulties as people had no doubt their houses would increase forever at recent rates, which are clearly ahistorical. So many of my friends bought more house than they could reasonably afford by taking ARM loans or even worse, interest only loans and, to compound matters, they would "take out the equity" in their homes year after year to buy goodies that would depreciate in value because they just knew that their homes "would pay for it" by continuing to increase in value. Three of them have lost their houses not through the subprime mess but through their own super materialistic lifestyles. These same people always kidded me about such a left winger being so conservative with my finances and that I was just wasting all that equity. Nothing takes place in a vaccum, and I think some of this behavior could well be attributed to Americans thinking that as the world's only super power, the rules of the past do not apply to us. Whether it is the invasion of Iraq and Afghanistan or today's financial/economic mess, much of our problem stems, I believe, from our arrogance and self important image of ourselves. I think it is no coincidence that much of this mess can be laid at the feet of my fellow baby boom generation Presidents, Clinton and Bush. A big economic shock may well be the best thing that ever happened to this country; clearly we are just stalling for time by fiscal sleight of hand. We don't need more cheap dollars but a rejection of imperial pretense by vastly curtailing military spending and a radical change in foreign policy..That 3:00a.m. call to the President is much more likely to be about economic collapse than a huge loss of life from terrorism.

The "mark-to-market" rule is fundamental for protecting investors specially those investing in funds because it restraints the use of the face value of the assets it owns and in this way avoids unrealistic estimation of the value of the fund. Can anyone imagine not using daily the "mark-to-market" rule for stock assets for example and use instead its original or purchased value? Additionally, although subprime mortgages will always have a value that corresponds to the house value, that by the way is expected to fall more than 30%, less the costs of home foreclosure and sell, they are also part, as is well known, of sophisticated securities that don't have value anymore. The institutions are insolvent not because of the rule but because they do not have the assets anymore to cover their obligations.