Thursday, October 13, 2011

Fantasy from the IPA

Only an ideological puritan from the IPA could argue that the volatility in equity and other markets is all the fault of Governments.

The item notes

There is also international empirical evidence to suggest that share markets returns are lower and volatility is higher when legislatures are in session, which is not altogether surprising given the role of taxation and regulatory policies on the economic climate for private sector activity.


Economic growth, be it at a national or global level, can only be led from the front by a private sector unencumbered by the unsustainable debts, uncompetitive tax regimes and onerous regulations of big governments.

A fascinating read really that completely fails to address the actual problem, which is that markets have two means of valuing assets, and that one of them can result in incorrect movements. What I didn't say is that at heart the conditions identified by Keynes for creation of a depression is a case of just the same kind. When consumers think prices will decline in the future or their income is insecure they stop spending thus fulfilling the expectation. Such cycles are not broken by natural market forces.

The reported comment of Kevin Rudd that "the global economy as a 'wild beast,' and that the task of policymakers is to 'tame the beast to the greatest extent we can.'" can be read two ways. One - what I think is the intended one - is to act to ensure market rules are established so that markets work. The other would be to assume it means replace markets with something else. As all totalitarian regimes have found you can't replace markets, merely drive them underground.

It would be nice if fans of markets were to talk about real markets and real people.

Novae Meridianae Demetae Dexter delenda est

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