The fall of KS - silence of the lamb

Was the rise and fall of the KSE 100 a policy mistake - a political and economic error of judgement or what? It is a strange coincidence that around the globe a dozen stock markets in the emerging economies reached their all-time peaks around the same time as the KSE 100. And their subsequent fall has been equally virulent. The fear that to explain the economics of rise and fall of the KSE would set in motion questions they would rather not answer now. The people are not quite ready for it. So the Government's silence is a shrewd tactical retreat. No doubt there will be martyrs along the way. People have already lost their fortunes and the debate on the collapse of KSE has just begun. It would have been a good debate if only it had taken place in December 2004 - when the index stood at 6000.
But the punditry that is now so sanctimonious in apportioning blame had neither the courage nor the wit to speak, when it mattered. If there was a fraud committed in this whole episode then it was primarily this silence of the lambs.
Even now the debate is being conducted in a vacuum. It is being presented as a political issue entirely divorced of economics. The opposition is milking the popular discontent and has everything to lose by introducing anything as stale as common sense into this discussion. Curiously, the government has a much better defence in economics but chooses not to use it.
This was no coincidence. This was not a political error or a fraud in the superficial sense. On March 22nd the US Fed raised the short term rates to 2.75% and signalled growing risk of inflation. The so called carry over trade and margin financing, where the investors could borrow large amounts and invest in high yielding stocks (effectively earning free money), became less compelling and the speculators left the markets. This was an economic event. This is exactly how the free market works.
A free market is a system that is about making informed choices and living with the consequences. The disequilibrium in the system is self-correcting and needs government regulation about as much as a fish needs a bike. The forces that drive this system are greed and fear. This is a journey from self interest to enlightened self interest. It is a view of human beings as free, adult, and responsible. The government is only there to facilitate the system.