Financial markets are dominated by a large and growing ocean of money, sloshing around trying to find the highest returns just as water tries to find the lowest point. This is partly because of growing wealth inequality meaning the rich have more to invest than ever, and partly because of the financialisation of everything, which means pensions and sovereign wealth are now tied up in investment funds.
A rational(ish) market is not possible unless there is a way for investors to opt out by saying, "I can't see any prospect of capital gains. I'm out of here." This is the role played by interest-bearing investments like savings and bonds, but with interest rates having been so low for so long, there is no good reason to invest in interest-bearing investments. Instead, everyone pursues capital gains from shares, gold, crypto, collectibles and who knows what else.
As a renter saving for a home deposit, I'm currently earning 7.43% on some of my savings because I'm taking advantage of the the first home super saver scheme. Imagine if interest rates like this were available to everyone who is a net saver. Share prices would plummet as people rushed for guaranteed returns, as would the crypto market and the price of gold and homes.
Central banks have been pushing on a rope for years now, trying to stimulate economies using the only tool they have, while governments have failed to provide adequate stimulus. This started after the GFC in Australia and after the Dot Com bubble in the US.
One solution would be for the RBA to have a legislated floor on the cash rate of 4% or 5%. Any cash rate below this is irresponsible and ineffective at stimulating the economy, anyway. Ruling it out would force the responsibility for economic stimulus onto the government, where it belongs and help delay and ameliorate the impact of financial crashes.
Totally agree, and of course they will make their huge profits, sell at the right time and those in pension schemes will end up the big losers. So right its one big grift, sickening what will happen when the crash comes as they run off to their bolt holes.
No sensible person ever believed in the strong form of the efficient capital market hypothesis, which just goes to show that not all Ph.D. economists are sensible. Few still believe the semi-strong form ("nobody can beat the market,") although it is a good guiding principle for most retail investors. The weak form ("chartism is bunk") is still generally valid, AFAIK.
Investment institutions have customers, and some customers want their investment advisors to play the soothsayer. The customer is always right, eh? I cannot explain why FX traders use it.
Financial markets are dominated by a large and growing ocean of money, sloshing around trying to find the highest returns just as water tries to find the lowest point. This is partly because of growing wealth inequality meaning the rich have more to invest than ever, and partly because of the financialisation of everything, which means pensions and sovereign wealth are now tied up in investment funds.
A rational(ish) market is not possible unless there is a way for investors to opt out by saying, "I can't see any prospect of capital gains. I'm out of here." This is the role played by interest-bearing investments like savings and bonds, but with interest rates having been so low for so long, there is no good reason to invest in interest-bearing investments. Instead, everyone pursues capital gains from shares, gold, crypto, collectibles and who knows what else.
As a renter saving for a home deposit, I'm currently earning 7.43% on some of my savings because I'm taking advantage of the the first home super saver scheme. Imagine if interest rates like this were available to everyone who is a net saver. Share prices would plummet as people rushed for guaranteed returns, as would the crypto market and the price of gold and homes.
Central banks have been pushing on a rope for years now, trying to stimulate economies using the only tool they have, while governments have failed to provide adequate stimulus. This started after the GFC in Australia and after the Dot Com bubble in the US.
One solution would be for the RBA to have a legislated floor on the cash rate of 4% or 5%. Any cash rate below this is irresponsible and ineffective at stimulating the economy, anyway. Ruling it out would force the responsibility for economic stimulus onto the government, where it belongs and help delay and ameliorate the impact of financial crashes.
I just shorted one share of SpaceX. Hope I can make the margin calls! :-)
So far I’m up AUD 70 (gross, transaction costs are swingeing on such a small volume!)
Totally agree, and of course they will make their huge profits, sell at the right time and those in pension schemes will end up the big losers. So right its one big grift, sickening what will happen when the crash comes as they run off to their bolt holes.
No sensible person ever believed in the strong form of the efficient capital market hypothesis, which just goes to show that not all Ph.D. economists are sensible. Few still believe the semi-strong form ("nobody can beat the market,") although it is a good guiding principle for most retail investors. The weak form ("chartism is bunk") is still generally valid, AFAIK.
And yet investment institutions spend a great deal of money on it, and it is used by virtually all FX traders.
Investment institutions have customers, and some customers want their investment advisors to play the soothsayer. The customer is always right, eh? I cannot explain why FX traders use it.
See the Monty Python sketch of Mystico and Janet
MMM? Trillions????
Are prices high or is money cheap???
The World Wonders.
Kriugman has a post on oligarchy this morning.
It helps to get $36 billion in taxpayer subsidies.
The grift is now the norm. Capitalism's final form.
I’ve been reading about the “gilded age”: https://en.wikipedia.org/wiki/Gilded_Age - there is plenty of scope for more grifting before it all collapses.