John Cassidy: Efficient-Market Theory

[mutikonka]

Blimey John you never used to talk like that on the 45 bus to Aquinas!

[bonfirejovi]

The market is a hell of a lot more efficient than Government, thats for sure.

[Katiaus]

Not only the expanding money supply, but the market in capital finance is in no measure a "free market" when recourse to the public coffers limit the market's accurate measurement of risk. Cassidy complains that the market should have priced the "credit products" (its unclear exactly which one's hes referring to) at 1500 basis points above treasury instead of 50. But it is exactly the political interference in the market which subsized that bubble in the first instance.

[Scientisticsoviet]

@Katiaus (cont.) Such as at a minimum the de jure ban on overt fraud and theft. Or, for a more heart-wrenching example, the ban on child labor.

[thecfazz]

@Katiaus I was going to comment on this video and say something along the lines of what you said, but seeing as you beat me to it I no longer have to comment! Oh wait...

[tg679]

This is especially true in housing markets, where 'mum and dad investors' do not want to sell their home for less than they bought it (in nominal $ terms).

If inflation levels were higher, the speculative bubble would be absorbed by price level increases quicker.

It's only a theory, but nominal price changes do have a large behavioural effect on markets.

[Marine475]

Free market? Are you kidding me? Who is this guy? How can you have free market when interest rates are set artificially low by politicians?! This whole issue is a joke. The only reason we have bubbles is due to ever expanding money suply.