Hi Rob,
>On the matter of tolling bells, who's read Robert Shiller's *Irrational
>exuberance*?
Not me.
>with a DJI up 200% in five years as opposed to real personal income and GDP
>increases of 15% and a corporate profit increase of thirty.
Be careful when you imply that the stock market might be about something else
than profits... You'll get a "mystificator" label sooner than you thought. :-)
>The
>question which occurs is, if these people were to take their dough out of
>the share markets, is there anywhere for 'em to put it? Shiller wants a
>host of new investment products out there quicksmart, so punters can hedge
>their asset values, come the bear charge. Which implies there ain't too
>many options right now.
I don't get it.
1) Shiller thinks bonds and money market funds aren't safe? Because those have
grown so much lately that there's more than enough room there for Americans to
put their money. They've got a huge pile of debt to buy back from foreigners. Now,
those types "investment products" may not be safe but if they aren't, no financial
engeneering will preserve the punters' wealth. In that case only governmental
insurance would be enough.
2) It's my turn to be mystified. If baby-boomers sell stocks, they're going to get
their
money from stock buyers. Those buyers will have to take it out from somewhere,
right? Unless it's some central bank or government who bails out the speculators,
the buyers will have to sell another type of paper (or their creditors will have to
sell
something, if they borrow to buy). The baby boomers can then simply buy that
type of paper. In other words, I don't understand why stocks selling by baby
boomers should necessarily increase the wide monetary aggregate and/or
increase the savings rate.
>So have we a sustained bubble because there's nowhere else to put people's
>retirement money?
Partly.
>And wouldn't that militate against institutions offering
>hedging products?
Definitely.
>And how would Bush's social security plan play out on
>this underlying question mark (he wants to stick public funds on the
>markets, no?)?
No idea. Anyway, public funds already are on the market. They aren't keeping the
surpluses in cash, right?
As to Krugman,
>But
>global bond markets aren't equal-opportunity lenders, and third-world
>countries don't get the benefit of the doubt. In a recent debt
>refinancing Argentina had to pay an interest rate of 16 percent -- 10
>percentage points more than the U.S. Treasury pays.
Isn't that the result of Argentinian monetary policy? I'm speculating here so
Argentinian readers please correct me if I'm wrong... Aren't the monetary authorities
buying pesos to keep it's value on par with the dollar? Isn't that the main cause of
those high rates and not some kind of financial racism? Because, as he says...
>The irony gets deeper
>when you notice that Malaysia, which was supposed to have been cast
>into the outer darkness after it imposed controls on foreign
>investors two years ago, has had no trouble selling its bonds on
>world markets.
Julien
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