Monday, August 04, 2014

A dumb question


And what will happen next?


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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:

Sackerson said...

Thanks for taking the trouble, M.


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.