Iran's "new" supply won't help prices:
Igy
Iran's "new" supply won't help prices:
Igy
U.S. stock futures pointed Wednesday to a third straight session of gains, ahead of the release of Federal Reserve minutes that could fuel hopes of a pause to rate hikes.
The upbeat mood came as investors shook off a mostly down session in Asia and instead looked ahead to a raft of economic data and the insight into the Fed’s assessment of the U.S. economy.
...and the Muppets continue the losing strategy of buy-on-the-dip...
It's worked for me!
these things are all complicated but I'm coming over to the idea that much of this has been a vote of no confidence in the central banks - for a few weeks there the world was saying that the central banks in fact did not know what they were doing.
which is probably true - they don't know what they are doing. I'm under no illusion that the central banks can actually do much good, but the question is how much actual damage the central banks can do. That may be the battle we see for a while now in the markets.
It only works if you sell on the rally.
The question of central banks and what they can do is a sticky wicket. Economics, being essentially a theory of human behavior, can be exceedingly complicated, involving irrationality, adaptation, and creativity. There is an argument that central banks should be abolished because they can never know with any reasonable degree of certainty the effects of their actions, and that everything should be left to the "free market", and that currencies should be pegged to something tangible like gold.
This whole period of civilization during which we have had central banks more or less in their current form--say a hundred years--is incredibly short, when you think about it. The experiment is ongoing, but seems to have accelerated wildly, given what happened during sub-prime. Such an acceleration is bound to create more issues, and more exposure, which leads to more scrutiny, and perhaps more doubt.
Whether or not to intervene is a tough question. Look at the biggest intervention, the "New Deal" by Roosevelt et al. As far as the USA goes, you can trace everything to that point. The problem is that we do not know with any certainty what would have happened had there been no New Deal, and had some alternate course of action been taken.
agreed
I tend to think that the world goes on and on and as long as most governments are bent towards free enterprise and at least not obstructionist toward business...things will go on ok. Sure there will be manias and busts like 2008/9 and then the gov't needs to step in...but I just don't see the impact of a central bank accomplishing a whole lot in 99% of situations.
Like you say, economics is about human behavior, not science, and therefore every situation is different than the last. The invisible hand has made free markets fairly resilient and flexible...I'm not sure an interest rate change here or there really tips things much in non-crisis situations.
Maserati and agip,
The question is have central banks created a monstrous amount of mal-investment? If the answer is yes, how is it unwound? Can the unwinding be benign?
Igy
It only works if you sell on the rally.
Buy low, sell high.
Ghost of Igloi wrote:
Maserati and agip,
The question is have central banks created a monstrous amount of mal-investment? If the answer is yes, how is it unwound? Can the unwinding be benign?
Igy
fair question
can you point to an example of a monstrous amount of mal-investment?
agreed that in the emerging markets there has been much dangerous malinvestment.
but in the US? where?
preferably without anecdotal detail
agip,
First example:
Outstanding US Bond Market Debt
2000 $17.327 Trillion
Q3 2015 $39.590 Trillion
That was easy.
Igy
USD 536,000,000 loan guarantee to Solyndra.
ALL gone.
Investment?
agip,
High Yield Outstanding Debt
2000 $688 Billion
2015 $1.8 Trillion
Igy
I believe the question was about malinvestment by the central bank.
agip,
Once darlings of the negative earnings word:
TSLA, CRM, LNKD, SHAK, SYSS, TWTR, NOW, SCTY to name but a few.
Igy
Ghost of Igloi wrote:
agip,
First example:
Outstanding US Bond Market Debt
2000 $17.327 Trillion
Q3 2015 $39.590 Trillion
That was easy.
Igy
do you think this would be dramatically lower if the fed hadn't bought treasuries?
I don't see how that works.
and treasuries aren't really malinvestment, right? I mean unneeded factories and homes is malinvestment. But treasuries?
Ghost of Igloi wrote:
agip,
High Yield Outstanding Debt
2000 $688 Billion
2015 $1.8 Trillion
Igy
some validity to this. assuming your numbers are correct.
although 39% of that increase is just inflation
ok.
Much of that is energy investment, right? While that's looking really bad right now, I suspect it will be useful in the future.
but I'll accept your citation.
Governments in the USA spending money on implementing policies that counter "induced demand".
"Induced demand" is someone's desire to avail themselves of the most economically favorable option of achieving an objective.
Government policy and attendant expenditures aimed at countering or eliminating induced demand are decidedly uneconomic, and therefore may be viewed by some as "malinvestment".
Consider transportation. Light and heavy passenger rail are far more expensive in many areas of the country than, say, adding lanes or implementing express buses, but they are built anyway. To accommodate their routes, the orderly and efficient regular flow of traffic is disrupted without consideration. This disruption is EXPRESSLY justified in the name of countering "induced demand"--i.e. put in a train that is more expensive than driving, then drive up the cost of driving until the train is cost-competitive. It never quite makes it, so the train is always subsidized as well, to make up the difference, and that subsidy most often comes from tolls and gas tax, which make driving more expensive.
Uneconomic, and therefore described by some as "malinvestment". You're not getting nothing, you're getting a train, therefore it is SOME type of "investment", and not just complete economic waste.
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