<<“I must state at the outset that I am in fundamental disagreement with the prevailing wisdom. The generally accepted theory is that financial markets tend towards equilibrium, and on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it. In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.” >> - Soros
Sounds downright Austrian, although he's not just talking fed of course. Lot's of the wonderful things in the economy have been BECAUSE of the stock market mechanism [kind of obvious really, financial related expenditures have exploded, companies started up for the sole purpose of going public and cashing out, etc], and not the market simply exploding because of the wonderful things happening.
The implication seems clear to me, with the positive feedback loop interupted, depression looms, weather 1930's style, 1920's [German] style, choose your flavor Mr. Greenspan! Actually, it seems clear he already has... is "Greenspan" of Germanic origin??
dAK |
