Some thing dangerous is brewing. It is the belief that our problems are created by the markets and speculators.
Make no mistake about it. Financial markets are an essential component of the growth of any country since day one. It is one of the four main pillars of a growing and expanding society.
In his brilliant book "The Birth of Plenty", W. J. Bernstein shows why every successful society in history had four essential features working for them.
1) Property rights to stimulate and protect investors.
2) Knowledge and research to develop new ideas and new discoveries to improve the standard of living of the society.
3) Communication and transportation to bring products and people together.
4) Financial markets to finance growth and the new discoveries.
The stagnating or fading economies fail this test. Make no mistake about it, our recent attempt to change the nature of the markets by forbidding shorting or believing that the cause of rising commodities is speculators is seriously misguided.
It is ludicrous to think that the markets are efficient when commodities like oil and gold sag. But speculators are forcing their rise.
The markets are driven by government policies and the role of politicians in a society. The misguided policies of the Fed after the 2000 bear market are the main cause of our problems. Cheap money crates volatility. This time is no exception.
More, much more when you subscribe to The Peter Dag Portfolio on https://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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