When defining the twenty first century, we will not be able to neglect the first global financial crisis of the world. Perspective of the world and life styles in the eyes of economists and us has been changing comprehensively along with the crisis. In fact, it has to be so. We are going through an unusual period. What will shape tomorrow will be today's discussions. Today's discussions, however, are quite ridiculous. Have you been following what the unyielding defends of the market economy talk about nowadays? Last week in US Congress, the first official global financial crisis investigation was launched. At the first phase, senior officials of four financial institutions were interrogated with. The interrogations proceed as a farce. Let us take a look at the recent developments.

On Mondays we used to focus on the highlights of Turkey's economy; let us change this for today. There is nothing new and interesting about Turkey's economy. It is of course shocking that the 2009 budget deficit was 50 units unlike the expectations for 60 units but let us skip this subject for today. Today let us focus on the investigations US Congress initiated.

At the beginning of the "18^th Brumaire of Louis Bonaparte" Karl Marx criticizes Hegel's statement that historic facts and personages recur twice; and adds "historical facts recur twice; once as a tragedy and again as a farce" der. Let us adapt this to the milieu of economic crisis we are facing. We have witnessed a number of economic crises until today. Before, we always had somebody to blame. Remember, initial crisis models accused relevant governments for being populists all the time. Then, we blamed the bank officials. However, it seems that this time the problem originates from within the system and from its own modus operandi. Under these circumstances, system's self defense looks funny. Let us follow Keynes; let us change our ideas if the facts do not back them. So, why is it a farce trying to blame the fact itself?

The first example is about Eugene Fama. Do you know him? Fama is an important figure for financial theory. He is the father of the Efficient Markets Hypothesis which is the extension o free market economy in financial theory. It was this hypothesis that brought a Nobel Prize to him. Her currently studies at Chicago University. He constitutes one of the main pillars of the free-market advocate Chicago school in economics. Last week, the New Yorker magazine published an interview with Fama. The story also questioned an article titled "what do Chicagoans think of now?"

The discussion in the article conveyed the idea that as he is seventy years old as far as I know, Fama seemed to close his eyes toward the reality. He was fighting with facts. What did the Efficient Markets Hypothesis say? Market prices reflected in any case the real value of the financial contract whose value was preset. Even if an insider who learned the pre-set value and tried to make a transaction, prices would immediately reflect that information and thus it would not be possible to enjoy extraordinary profits. What is the current crisis reflect? Some people purchased a series of financial contracts at prices that do not reflect the real value. In a way, drinking water was polluted by sewage water. No one knew whose balance sheet and even contained securities transferred at high prices. Therefore, it was uncertain whose portfolio and balance sheet was damaged the most. People started not to engage in transactions with each other. Interbank transactions market collapsed.

What lost ground was the view "that prices immediately reflect all the information about the traded financial contract." This theory earned Famaa Nobel Prize. Now, when you try to talk to him he only gets angry. He does not say that it is a theoretical phenomenon that helps us acknowledge the economic operation; i.e. an exercise that has nothing to do with the reality. Because in the past that theoretical fiction was reflected as it was the identical twin of the reality. Criticisms were also received with this lens. So, what happens then? Eugene Fama cancelled his subscription to the Economist magazine. This is like stopping to watch the news on TV instead of confronting the reality. The steps you take do not alter the future; but they at least relieve you.

In this context, American bank officials make quite amusing statements. Lloyd Blankfein from Goldman Sachs for instance thinks of the crisis as a storm. Is not this nice? A storm; the product of the nature, a completely natural development. But the financial crisis was the direct product of the weak regulation framework of the financial sector, was not it? The fact that this storm was not observed in Turkey's financial markets can be traced back in the primitive transactions in markets and the tightness of the regulatory framework.

Then, what is the question we have to ask? What is the idea behind the regulations that led to the emergence of such a storm in developed countries? It is of course the Efficient Markets Hypothesis.  Fama's hypothesis laid the theoretical foundation for the realization of a series of financial transactions without being subjected to a public disclosure regulation. Therefore, Fama himself is the most important mental driving factor of this crisis.

It is not surprising then that Fama recently cancelled his subscription to the Economists.

What else he could  have done? Say sorry? What do you think Fama should do given the millions who lost their jobs and numerous small and medium size enterprises that suspended their activities?

This commentary was published in Referans daily on 19.01.2010