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Strategies & Market Trends : Asia Forum

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To: Lee who wrote (6813)	9/30/1998 7:48:00 PM
From: Frodo Baxter	Read Replies (3) of 9980

>Regarding AG's comment of sophisticated instruments and the great powers to find the highest rate of return: return is still a factor of risk. Or did he say we have created methods to increase the return relative to risk? It seems in the pursuit of the highest return we increased the risk and are now dealing with those consequences. I love AG, but I still think he lost something there. We face banking crises, a global liquidity crisis, and confidence crises. That our US financial institutions are holding up is quite positive. But please don't give credit for productivity increases to sophisticated financial instruments.< What Uncle Al is referring to, if you read enough of his speeches, is the breakdown in the relationship of money growth to GDP growth in the late 80s/early 90s. That is, money velocity increased due to all these whizbang financial gadgets. On the other hand, you have a good point. Right now for example, money is growing far faster than GDP. Money velocity is actually decreasing. So we may very well revert to the mean. A picture from my website might help. Pay particular attention to the right portion of the graph: geocities.com

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