Project Syndicate - 22 Feb 2018
The Harvard economist’s take on the recent stock market correction: it is now clear that last year's unusually low financial and economic volatility is over. He also argues that stocks are too high from a longer-term perspective, implying that that their rate of return is likely to be substantially lower over the next 15 years than it was over the last 15 years (reads in 4-5 min).
Published in Weekly selection 23 February 2018
Project Syndicate - 12 Feb 2018
The economist draws a historical precedent between recent market conditions and Black Monday (October 19, 1987). Both occurred against the backdrop of monetary-policy tightening by the Fed and dollar weakness; and in both cases, algorithmic trading amplified volatility. In 1987, despite all the drama, the impact on economic activity was muted. Would it be the same today? There is less room to cut interest rates, and much sentiment hinges on the President’s reaction. “A president who plays the blame game would only further aggravate the problem” (reads in 5-7 min).
Published in Weekly selection 16 February 2018
The New York Times - metered paywall - 8 Feb 2018
The author of “Zombie Economics” argues that the Bitcoin bubble should destroy once and for all our faith in the efficiency of markets. If the cryptocurrency were a store of value (an idea that he dismisses), asset prices would be entirely arbitrary because nothing is easier than creating a scarce asset. Any existing financial asset could then be priced not in terms of future earnings prospects but on the basis that people choose to value it highly. In his opinion, Bitcoin’s more worrisome development is this: a financial product with a purely arbitrary value has been successfully introduced in the world’s most sophisticated financial markets (reads in 5-6 min).
Published in Weekly selection 10 February 2018