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Hopefully, asset prices won't collapse
Sunday, January 17, 2010
The interactive graphic from which the image below was obtained comes from the World Economic Forum's new Global Risk Report 2010 where (surprise!) an asset price collapse is viewed as not only the most severe, but the most likely global risk.
That little red dot in the chart directly above and to the left along with the high reading for "connection strength" mean that we'll be in a world of hurt if the price of stocks, commodities, housing, and other assets head south, but, of course, you already knew that.
1 comments:
That's why we have centrally planned asset prices now. The CB let leveraged asset prices go above marginal utility, and now they have to artificially maintain prices at the higher levels.
If you centrally plan interest rates, you eventually wind up centrally planning the rest of the economy too. That eventually leads to a USSR type disaster, and the cycle begins again.
The only way for free market capitalism to be stable in the long run is to allow the free market to set interest rates. This means accepting minor short run fluctuations in output, as the market adjusts to changing circumstances.
Its the only way to prvent a long run disaster.
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