Monday, August 04, 2014

A dumb question

 
 

And what will happen next?

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3 comments:

Paddington said...

My take? Computers and satellite communication made the movement of money faster, introducing more short-term variance. The system will eventually oscillate out of control.

mappatazee said...

You can't compare percentage change with a linear scale.

Same chart with a log scale:

http://i60.tinypic.com/20pspba.png

Sackerson said...

Thanks for taking the trouble, M.

Quibbles/observations:

1. It's not percentage change, though you could analyse it that way.

2. Yahoo's graph stretches the first decade, so the incline should be a bit steeper there.

3. In a non-inflationary financial universe, stocks would rise at the expense of something else, and would eventually have to reach a ceiling, wouldn't they?

I suspect the "new normal" or "new paradigm" is based on:

(a) monetary inflation/QE
(b) the repeal of legislation designed to prevent banks from gambling with depositors' money
(c) the explosion in derivatives
(d) high-frequency trading

- and I fear that the gyrations of the last decade - 50% drop in the Dow, twice (so far) - are signs of "economic weirding", akin to the "global weirding" of the climate.