The Dogma of Low Interest Rates Is Wrong [View article]
You make an excellent point. It has been understood, by a few, for centuries that bubbles mis-direct human resources and lead to an inverse "division of labor", where people apply their talents to sectors that provide artificial rewards, which free markets would not allow, thereby failing to apply their talents to the most productive uses.
Adam Anderson, an officer of the South Sea Company, is reported to have written in the aftermath of the South Sea bubble:
" It is hoped that the year 1720 ' .... may serve for a perpetual memento to the legislators and ministers of our own nation, never to leave it to the power of any, hereafter, to hoodwink mankind into so shameful and baneful an imposition on the credulity of the people, thereby diverted from their lawful industry' .."
By "lawful industry", I believe he meant applying their talents in the most productive way as judged by a free market economy, rather than the most profitable way set by a manipulated economy.
On Oct 07 11:04 AM a fat panda wrote:
> "I could go on, but when you start saying things like "low interest > rates do not stimulate the real economy" then your thinking gets > so far away from the "facts" and "evidence" that it is, to be frank, > laughable." > > Harry, The problem with low interest rates is more than just the > carry trade. It lowers the cost of risk, and encourages people who > have no business owning a business to go into business. If you look > at the house flippers, as an extreme example, they surely stimulated > the economy, but did so by pushing demand forward and pulling resources > away from productive uses. That is to say, that it creates a "real" > economy that isn't real. > > The cost of this is much more than the loss in the house. The cost > is going to be terrible once you factor in the retraining costs to > get these 'business people' back in the workforce. People who left > real jobs to become house flippers now have stale resumes. They are > going to have to re-invent themselves. This can be a trival cost > in some industries, but for people who work in say the IT world a > year off is a killer.
Peter, you sound like a party-pooper, but you may be right, at least partially. I don't think we're done with the bear market yet, despite all the optimistic cheerleading. I think we may re-test the bottom, but doubt that we'll see Dow down to 4000. Footsie 2000 is also doubtful, but more plausible.
The Dogma of Low Interest Rates Is Wrong [View article]
Adam Anderson, an officer of the South Sea Company, is reported to have written in the aftermath of the South Sea bubble:
" It is hoped that the year 1720 ' .... may serve for a perpetual memento to the legislators and ministers of our own nation, never to leave it to the power of any, hereafter, to hoodwink mankind into so shameful and baneful an imposition on the credulity of the people, thereby diverted from their lawful industry' .."
By "lawful industry", I believe he meant applying their talents in the most productive way as judged by a free market economy, rather than the most profitable way set by a manipulated economy.
On Oct 07 11:04 AM a fat panda wrote:
> "I could go on, but when you start saying things like "low interest
> rates do not stimulate the real economy" then your thinking gets
> so far away from the "facts" and "evidence" that it is, to be frank,
> laughable."
>
> Harry, The problem with low interest rates is more than just the
> carry trade. It lowers the cost of risk, and encourages people who
> have no business owning a business to go into business. If you look
> at the house flippers, as an extreme example, they surely stimulated
> the economy, but did so by pushing demand forward and pulling resources
> away from productive uses. That is to say, that it creates a "real"
> economy that isn't real.
>
> The cost of this is much more than the loss in the house. The cost
> is going to be terrible once you factor in the retraining costs to
> get these 'business people' back in the workforce. People who left
> real jobs to become house flippers now have stale resumes. They are
> going to have to re-invent themselves. This can be a trival cost
> in some industries, but for people who work in say the IT world a
> year off is a killer.
Following G20, Markets Will Tumble [View article]