Yep, there still is this absurd idea of an economic rebound once the pandemic is over. It will be only a statistical one, not a real economic upturn. On a global level the service sector is such a huge provider of employment that the impact that pandemic has had is quite dramatic to overall aggregate demand. Same thing goes for tourism etc. The impact will be measured in years.Incomes have been either erased or diminished, and will not be recouped in entirety for several agrarian and industrial sectors around the world for at least 5 to 6 years. — Aryamoy Mitra
Have they? Likely that is counted from their wealth and not from income and from the rebounce from the initial covid scare and stock market plunge until today seen from the graph below:In the midst of all of this, having exploited the nature of sheer capitalistic brilliance, the world's billionaires have generated over half a trillion additional dollars to their name. — Aryamoy Mitra
Unfortunately there are too many that feel this way.If you've ever housed dormant misanthropic proclivities, now would be a fitting time for them to manifest. — Aryamoy Mitra
It's more of a symptom than a cause, even if with index investing there is this mechanism to put more investment in the stock that have risen the most and are the largest. Yet I think the reason is and in history has been the financial sector, which has with excessive financing promoted speculation and in the end created the bubble. Once the sound business enterprises are invested, then there's left the unsound ones and then pure speculation about the future values, usually of real estate. Since the Tulip Mania or the South Sea Bubble of 1720, all bubbles have behind them a very lax financial sector lending people to speculate.Exactly. Such mismatches between equity and dividend value are precisely what in my estimation cause stock bubbles. — Aryamoy Mitra
It's a simple fact when you think of it. And it explains simply why prices of real estate etc. can vary on a wide range yet real estate while rents do not go up and down in a similar way. Every rent is priced monthly while the vast majority of real estate are not bought and sold annually. This is multiplied in the stock market where it is genuinely a bunch of casino players are selling and buying a small proportion of the stock all the time. Hence we have gotten such absurdities as negative oil prices: a reaction when the casino players faced the actual possibility of ending up with the physical stuff they trade with.That's a really interesting analogy. It brings to light precisely how cyclical and sensitive today's economies really are with regards to demand and prices. — Aryamoy Mitra
Not perhaps commodities. Prices hikes of commodities have happened and have resulted in poor countries in food riots, but far more typical issue would be real estate and the price of homes. This is where even ordinary people are touched by asset inflation. They have took a loan for a home in a economically booming area, once they have paid that loan they have made usually a quite a profit (if they move then somewhere cheaper).Asset inflations result in commodities becoming unaffordable for those who don't possess them at the status quo, and subsequently detract demand from sellers — Aryamoy Mitra
Yet I think the reason is and in history has been the financial sector, which has with excessive financing promoted speculation and in the end created the bubble. — ssu
? ? ?This is fundamentally flawed because speculation goes both ways. Speculation doesn't cause bubbles across all financial instruments. — Benkei
Pursuit of price stability? I don't understand where this is coming from. Please explain.Asset inflation is caused by the pursuit of price stability and other monetary policies. — Benkei
Gambling is a natural human activity also, but a speculative bubble is separate from your ordinary market actions or the "Animal Spirits" Keynes talked about. Hyman Minsky explains quite well how speculative bubbles are endogenous to financial markets. Even the Tulip Mania did involve the banking sector, so the access to debt is intrinsic to a speculative bubble to form.I'm inclined to see financial speculation as just a natural human activity, and unless the government takes serious, serious steps to squash it I think it's going to happen in a number of different financial environments. — BitconnectCarlos
Even the Tulip Mania did involve the banking sector, so the access to debt is intrinsic to a speculative bubble to form. — ssu
In the end, the stock price isn't relevant but at what volumes it can be traded, its liquidity and volatility. — Benkei
gold and bitcoin will be the major winners — Baden
Yes. Without the access to debt, there are only very few that can invest. Debt leverage is quite essential.By "access to debt" do you mean, primarily, traders and investors using leverage? — BitconnectCarlos
The north is being used as a Petri dish.Thoughts on this?
? ? ?
How is it fundamentally flawed?
You think that speculative bubbles happen in times when interest rates are high and banks don't lend or what? Tell me an example of a speculative bubble happening in that kind of environment.
And tell me of a speculative bubble that didn't have speculation?? — ssu
Pursuit of price stability? I don't understand where this is coming from. Please explain. — ssu
OK, I'll just answer one part here as otherwise the answer would be too long.. I think the distinction between an economic bubble and a speculative bubble is useful; a speculative bubble can exist in a specific asset class but speculators as distinct from investors are a much smaller group that don't have the influence to cause economic bubbles. — Benkei
Asset inflation is caused by the pursuit of price stability and other monetary policies. — Benkei
Yet they look at inflation as it is now measured. That price stability is about consumer prices, prices of tomatoes, not the price of a Netflix share!Central Banks have a limited range of measures at their disposal because they're constrained by their purpose of maintaining price stability. — Benkei
A real estate bubble. As houses cannot be built by robots in China, real estate bubbles have a huge impact on employment and in the domestic economy. Second, people don't choose to speculate: families need a roof over their head and people looking for a home have to participate in the market however crazy it is. And people who own real estate will notice the wealth effect of their homes increasing in value, hence it's not just the few who invest or those who willingly take risks. For the majority of people buying an own home is the largest investment they will ever do. Hence it's not only the rent seekers and speculators that are players in this bubble. That building houses is labor intensive means that the bubble truly lifts up the economy. And for the financial sector? Mortrages and financing construction is the most ordinary thing they do. — ssu
Stock markets are excellent systems to bring lenders and borrowers together. Its insanity is caused by other things. — Benkei
Sorry, but in economics this term is used.What you describe isn't a speculative bubble in my view of how the word "speculation" should be used. — Benkei
OK. NINJA-loans (no-income, no job / assets) is actually a perfect example of speculation, if you just think about it.The real estate bubble was caused due to systemic risks. NINJA-loans, incentives for brokers to originate loans that were terrible, CDOs that were opaque and too much money in the system. — Benkei
Sorry, but in economics this term is used. — ssu
The speculator is just the lender. The banker assumes that the real estate prices will go up. If he is sure of that, NINJA-loans are totally logical. If the NINJA-loan taker cannot pay his monthly interest, no problem, the bank just takes the home and either the value has stayed the same or perhaps even risen. So "no" risks! And a huge amount of new potential customers. You see, the systematic risk you are talking about is actually the speculative bubble bursting. Then, what has not been seen in any statistics (which just have shown low risk and minimal amount of credit losses) suddenly change to something totally else. And similar thing with CDOs: just take your share and sell the risks to someone else, so no reason to think if the people can pay or cannot. After all, real estate prices go up! Have done that forever. — ssu
What does agnosticism have to do with this?If you look at it from my perspective, this is not a speculator because he's not agnostic about future values; he's invested in prices always going up. — Benkei
Merriam-Websterassumption of unusual business risk in hopes of obtaining commensurate gain
InvestopediaIn the world of finance, speculation, or speculative trading, refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value. With speculation, the risk of loss is more than offset by the possibility of a substantial gain or other recompense.
Market Business NewsSpeculation is an investment approach in which the investor aims to buy or sell stocks, currencies or other assets solely to make a quick profit. In such cases, the investor is known as a speculator.
What does agnosticism have to do with this? — ssu
Anyway, Then call it a debt bubble or simply an asset bubble. It's the same important phenomenon that earlier was even dismissed to ever happen in the modern financial markets (and still there are those who don't believe in bubbles anyway). I myself have seen enough crashes and market hype in my own lifetime to believe that this phenomenon does truly exist. And a crash can happen ...and then people start bitching about risk management being wrong. — ssu
and then people start bitching about risk management being wrong. — ssu
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