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Napanee, Ontario | 1. "You are taking exactly the same position of the climate modelers - they have been spectacularly wrong now for 18 years (and counting), as global temperatures have not increased, but they are absolutely sure they will be proven right in the long term. I have to say about inflation/deflation - like I've said about the climate - look at the data and see if it agrees with your assumptions."
Pretty poor comparison metric..... because we have been right in the short term, and the long term. Inflation has happened... and is still happening. In fact, deflation never lasts does it? Inflation has been the one constant we can observe since the beginning of central banking in this continent.
Alright, lets look at the data then - the real data, S&P 500 is at record highs... land is at record highs.... bonds are trading near record highs.... gold has paused in the last Cpl years, (for reasons you don't necessarily agree with me on).... but nevertheless, is up nearly 400% in 12 years.... oil is trading down, but up nearly 300% since the 90's.... food -just go to the grocery store. This is where the inflation has gone. But of course none of this is measured by the CPI... wonder why.
2. " Government bonds are valued according to expectations of returns to capital in the future. When you have an oversupply of money relative to (qualified) demand, interest rates are low, since they reflect the price of "renting" that money. Again, with the best minds all around the world betting money based on these expectations, why would anyone presume to assume that they know more than the collected wisdom of all the people valuing these bonds? "
Flawed statement.
Govt bonds USED to be valued that way... when there was a functioning market. When there wasn't billions of dollars fingering the scale from non-bonafide market participants that don't need to exercise any wisdom with regard to ROI. That's the whole point... there isn't collective wisdom or true market discovery anymore. If there was, interest rates would reflect the REAL increasing risk that bloated sovereign budgets purvey. The REAL interest rates from market discovery wouldn't be serviceable, because REAL market participants aren't dumb and wouldn't buy spanish and greek and Italian bonds at 7%, or US treasuries above 4 and 5%. And hence why the FED and the ECB had to buy them instead.
IMO You are trying to dissect only a portion of the picture to infer a result in your statements.
As to Your notion that the market is a reflection of collective wisdom, or is 'right' - that is a tired false hypothesis of the efficient market theory arising in the late 20th century. Yes, one person can be "smarter" than the market. It happens all the time. People see an opportunity, take a position, and make a profit on the mispricing of an asset. That's the whole incentive to invest. If market's were always right, there would be no opportunity for profit.
It's the opposite - Markets often and usually are wrong. People make money from improper market pricing in the short terms. Ask Warren Buffet if he thinks that markets price stuff right all the time. Just because it is the collective wisdom of people, doesn't mean the collective wisom is the right wisdom. As you say so yourself, the majority is usually wrong.
I would disagree that the majority express the views I have above. Maybe you have a skewed version of what the current consensus is, but if you want to see what the REAL majority is thinking, just tune into CNBC and MSNBC or read Bloomberg talking about our recovering economy, improving jobs, ect ect.. | |
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The 4.5 trillion dollar balance sheet. Continued QE
