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Politics : The Obama - Clinton Disaster -- Ignore unavailable to you. Want to Upgrade?

To: Wayners who wrote (10065)	3/28/2009 11:56:45 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 103300

Re: "Let's say the market free floating exchange rate of one currency against another is 1 ooplek for 2 zabos. In the country of ooplek the cost of a price of bread is 1 ooplek. Does this mean that the cost of bread in zabos is 2 zabos. I think the answer is no, but I can't really explain why....." If, A) Markets are totally 'efficient' (efficient and perfect always at price discovery), and B) Their are NO BARRIERS (tariffs, non-tariff barriers, etc.) in trade between Ooplek and Zabo --- especially (in this case...) no barriers in the free trade of wheat or bread, and (if wheat is not grown normally in either Ooplek or Zabo) the transportation costs to get those food items to the two places are at least roughly identical.... The bread should be the same price. (Ceuterus paribus). This is the centuries-old concept put forward by the founder of modern economics, Adam Smith, with his theory of the "Invisible Hand"... that markets are efficient. HOWEVER the Nobel Prize for Economics was given in 1991 for an IMPORTANT CLARIFICATION of that theory. It is now accepted that markets are ONLY EFFICIENT when nearly all of the most significant market participants have EQUAL ACCESS to all the exact same knowledge and market information! Which happens approximately never* (or, at least... rarely!) So... MOST OF THE TIME markets are less then 100% efficient at price discovery. Nearly all the time there is some element of inefficiency at work....