Re: So this is the great moderation!
- From: abelard <abelard3@xxxxxxxxxxx>
- Date: Fri, 10 Oct 2008 22:51:04 +0200
On Fri, 10 Oct 2008 21:33:19 +0100, "DVH" <dvh@xxxxxxxxxxxx> wrote:
"abelard" <abelard3@xxxxxxxxxxx> wrote in message
news:v3eve4lpjihfcb6a2qojkpkic1s1on85mh@xxxxxxxxxx
On Fri, 10 Oct 2008 15:35:12 +0100, "DVH" <dvh@xxxxxxxxxxxx> wrote:
Wall Street laid yet another egg this morning.
"One of the most striking features of the economic landscape over the past
twenty years or so has been a substantial decline in macroeconomic
volatility. Several writers on the topic have dubbed this remarkable
decline
in the variability of both output and inflation "the Great Moderation.""
- Ben Bernanke (2004 -
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2004/20040220/default.htm)
Chicago Board of Exchange VIX index of volatility rises above 60 for the
first time ever (9 October 2008).
http://www.cboe.com/micro/vix/introduction.aspx
"When the prices of assets fall sharply, that triggers margin calls for
other investors, a hideous, insidious form of feedback that triggers
another
round of asset liquidations.
Which in turn undermines the capital of banks - which forces them to dump
yet more assets and call in more loans.
It's a terrifying process, the precursor to a "Minsky Moment" - called
such
after the economist who described a breakdown of the entire financial
system
caused by a panicked mass liquidation of assets."
Robert Peston today
(http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/a_global_solution_needed.html)
"At its core, the Minsky view was straightforward: When times are good,
investors take on risk; the longer times stay good, the more risk they
take
on, until they've taken on too much. Eventually, they reach a point where
the cash generated by their assets no longer is sufficient to pay off the
mountains of debt they took on to acquire them. Losses on such speculative
assets prompt lenders to call in their loans. "This is likely to lead to a
collapse of asset values," Mr. Minsky wrote.
When investors are forced to sell even their less-speculative positions to
make good on their loans, markets spiral lower and create a severe demand
for cash. At that point, the Minsky moment has arrived."
http://online.wsj.com/public/article/SB118736585456901047.html
what about the gridjy moment?
Totally discredited. Gridjy brought too much of his experience of eastern
european pricing signals *in a partially feudalistic society* to bear on
market retreats. Events proved him wrong in 1986. As any fule knoe.
typical denier...you couldn't recognise truth if it came into
your parlour and told you personally....
you people are just religious momians....
regards
--
web site at www.abelard.org - news comment service, logic, economics
energy, education, politics, etc 1,552,396 document calls in year past
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