 Hello, everybody, and welcome back to the Minor Issues podcast. We've had about a two-week break here, but it wasn't for vacation. It was just, we were really busy here at the Mises Institute. And plus, the purpose of this podcast is not to provide a weekly, ongoing commentary about markets. It's much more specific than that. It's lessons learned and not discussed in the mainstream media. Today, I want to talk about the status of the overall market right now. In 2020, stock markets went up dramatically. And then starting in 2022, we saw a severe correction in markets and many other markets besides stocks. And now the stock markets are back up. As a matter of fact, some markets are in bull market territory, and yet we're still sitting here expecting very large declines in markets. So the question I'm pondering here today is, why do markets take so long? Why don't they go in a straight line from point A to point B? And why doesn't it happen instantaneously? And why do markets sometimes go even in the wrong direction? For example, not only are markets up right now, but there are several reports out there where short sellers, people betting against the market have lost billions and billions of dollars. This makes things interesting, but it also provides us an opportunity to talk about markets. Now, first of all, Austrians can't predict like astronomy, where you can predict when Haley's Comet is going to return and where it will be in our solar system. So Austrians can't predict like that. We can't predict timing. We can't predict magnitude. We're simply trying to use economic theory to analyze the market process in an historical framework. Mises tells us a great deal about markets. And in a day-to-day fashion, he refers to the playing state of rest when business comes to a close at the end of the business day. In other words, we're considering what everybody can do, what they want to do, what they think is best, and then what they actually do today about those circumstances. So it's the normal day-to-day business type of equilibrium. Now he also has many other forms of equilibrium. And the most unrealistic is his evenly rotating economy, which is a machine-like economy with kind of like fake humans that never change. This is an imaginary construction and it allows Mises to present a theory of profit and entrepreneurship based on the uncertainty that human life has. The mainstream of economics adopts a evenly rotating economy-like structure to actually analyze the market process. They use Homo economicus, where we are all the same as each other and we don't change day-to-day. And then they adopt perfect rational expectations about the future so that everything more or less instantaneously changes in the right direction to reflect everything that's gone on in the economy up until that point. So when they're forced to examine reality, they'll often pass it off as, quote, a random walk or shocks, or they'll develop some kind of psychological explanation for why markets aren't behaving the way they expected and predicted. So in the Austrian framework, we know that things do change day-to-day. And so our predictions from yesterday have to be altered ever so slightly in many cases to reflect the changes from day-to-day. People change so that the population of people and their preferences, the goods that they like, their incomes and so forth, that changes on a day-to-day basis. And then of course there's the wild card of government policy, the Federal Reserve, the sort of external issues to the market economy. And these also change day-to-day, which is why market participants typically follow what the Fed is doing and saying, what the government is doing and saying, what policies are being passed or considered. Information is also a slow process. Decisions have to be made. They have to actually take place. They have to be admitted. They have to be transmitted to the market and more generally they have to be analyzed and then they have to be acted upon. So information is not perfect and it's very slow to materialize and difficult to understand as well. And all of this has to be worked through markets. Some markets seem to act extremely fast, extremely quickly, almost instantaneously, and yet others are very slow. So if we were to posit a change in someone's demand, we would anticipate a change in consumption. And if it's a general phenomenon, it's going to have a big impact on the marketplace. It's going to have a big impact on businesses. They're going to be reporting different profit and loss statements. And then all of that, the impact of which is going to be spread throughout resource markets and resource investments. So those changes in demand work themselves through from the consumption side, the demand side of the economy onto the supply and resource side of the economy. And then, of course, there's the whole process of accounting for all this. General information generated within the company, within the firm that's eventually, only eventually transmitted to the market, which then reacts and creates a feedback mechanism. So we've got to realize that the market process that we're analyzing is characterized as a process that takes time for our thoughts to come down into accounting statements that tells us a lot about the direction of firms and, of course, stock prices. Now the problem that we're worried about are still there, and they're very large problems. And what we're seeing right now is that they're working themselves through the accounting process, through the market process. And they're coming out into markets, being announced and being acted upon. And we're seeing that ultimately in stock prices. In the meantime, the Fed has acted. We just saw that they paused their interest rate hikes. And there's other reasons, for example, the FDIC bailout of banks, the three very large banks that were bailed out, could only be making the process worse, not better. And so we're worried about this problem, which I've discussed several times. It harkens back to the decade-long period in which the Fed held interest rates very, very close to zero. And now that they've raised interest rates, they're creating an interest rate problem throughout the economy. It's not just banks, it's also insurance companies, which of course affect multiple insurance policies per household in the United States. There's pensions. We have a growing retirement population. And pensions are not looking so good because they had to invest in low-return, high-leverage products and now interest rates have risen. And then on the real side, we got big problems in the capital structure, as explained in the Austrian theory of the business cycle. And then of course, the resulting problem in late labor markets where labor moves around according to wage rates that are distorted in the business cycle process. So the minor issue here today is that markets do take some time and are not perfect. No one has all the information and the market takes all of the available information and tries to make the best use of it, but it's not a perfect process. And as we wait for the market process to work itself out, we've got to realize that none of those fundamental underlying problems in the economy caused by interest rate distortions have fundamentally changed and nor have they worked themselves out to a significant degree. Markets are often a problem of time and waiting, and real world markets do not adjust perfectly to everything that we expect them to eventually do.