5 ms·

>They used this excess of digitally printed capital to buy real capital assets such as global equities. Equities aren't real capital, in the economic sense, ei

>They used this excess of digitally printed capital to buy real capital assets such as global equities. Equities aren't real capital, in the economic sense, either. Real capital is land, plants and equipment; equities are financial capital. >"the Swiss National Bank digitally printed an enormous amount of Swiss Francs and bought Euros in order to peg their currency lower (didn't work) What do you mean it didn't work? They maintained the peg for years. One of the reasons they unpegged the currency was that the Euro was depreciating, thus maintaining the peg was causing the SNB to depreciate against other currencies, like the USD. >what is the fair market price of global equities when some buyers can print money? Does it matter? There's no mystery. Fair market price is the agreed upon price in a transaction. If you think that for some reason all prices are distorted due to central bank printing, then account for that distortion in determining what price you're willing to accept or bid.

jhulla 11y ago
Equities represent shares in real assets: factories, patents, etc. A pedantic discussion of where accountants draw the line on the definition of capital does not change the point: central banks have printed trillions and participate in capital markets. The SNB experienced a massive capital loss when abandoned their peg from 2011 in early 2015. They entered and exited their positions due to politics and global capital distortions. http://www.bloomberg.com/news/articles/2015-07-31/snb-posts-first-half-loss-providing-critics-with-more-ammunition http://www.bloomberg.com/news/articles/2015-07-31/snb-posts-... http://www.economist.com/blogs/economist-explains/2015/01/economist-explains-13 http://www.economist.com/blogs/economist-explains/2015/01/ec... It is a tautology to suggest that a market price is by definition fair - after all it was agreed by both buyer and seller. But markets themselves can be unfair - in the most basic sense, by the participation of shills. https://en.wikipedia.org/wiki/Shill https://en.wikipedia.org/wiki/Shill And in our current economic environment: the concept of too big to fail. Politically, we've accepted an asymmetric reward structure for some market participants. This results in market distortion and unfairness to others. https://en.wikipedia.org/wiki/Too_big_to_fail https://en.wikipedia.org/wiki/Too_big_to_fail
- forgetsusername 11y ago
  >The SNB experienced a massive capital loss when abandoned their peg from 2011 in early 2015 First of all, I wouldn't call a 10% loss "massive". The market generally suffers one of those events annually. Second, it was short lived. The USD/CHF went from 1.01 to 0.86 after it was unpegged. It now sits at 0.97, 8 months later (1.2, 0.98, 1.08 for the EUR/CHF, respectively). It was a non-event. I mean, I'm still trying to figure out what point you're making. Are capital market distortions new? Sure, the scale of intervention might be larger. But the scale of everything is larger today. And why do you assume that these distortions are always bad? I don't. They have to be examined on their individual merits. I like the government building roads and subsidizing certain industries. Sometimes it's good business. Maybe buying stock in certain domestic industries is as well. Are shills new? Is an asymetric reward structure new? The basis of the argument against TBTF is moral hazard. Is that unique to the banking system? I've seen it suggested on these very boards to incorporate your company ASAP, in order to prevent personal financial liability. Well, that just might promote higher risk-taking by the entrepreneur. Or what about the house-flippers? Heads I cash in, tails I mail the keys to the bank. Are these people too small to fail? This is our system. I choose to study it as it is rather than compare it to some non-existent ideal.

jhulla 11y ago

Equities represent shares in real assets: factories, patents, etc. A pedantic discussion of where accountants draw the line on the definition of capital does not change the point: central banks have printed trillions and participate in capital markets. The SNB experienced a massive capital loss when abandoned their peg from 2011 in early 2015. They entered and exited their positions due to politics and global capital distortions. http://www.bloomberg.com/news/articles/2015-07-31/snb-posts-first-half-loss-providing-critics-with-more-ammunition http://www.bloomberg.com/news/articles/2015-07-31/snb-posts-... http://www.economist.com/blogs/economist-explains/2015/01/economist-explains-13 http://www.economist.com/blogs/economist-explains/2015/01/ec... It is a tautology to suggest that a market price is by definition fair - after all it was agreed by both buyer and seller. But markets themselves can be unfair - in the most basic sense, by the participation of shills. https://en.wikipedia.org/wiki/Shill https://en.wikipedia.org/wiki/Shill And in our current economic environment: the concept of too big to fail. Politically, we've accepted an asymmetric reward structure for some market participants. This results in market distortion and unfairness to others. https://en.wikipedia.org/wiki/Too_big_to_fail https://en.wikipedia.org/wiki/Too_big_to_fail

forgetsusername 11y ago
>The SNB experienced a massive capital loss when abandoned their peg from 2011 in early 2015 First of all, I wouldn't call a 10% loss "massive". The market generally suffers one of those events annually. Second, it was short lived. The USD/CHF went from 1.01 to 0.86 after it was unpegged. It now sits at 0.97, 8 months later (1.2, 0.98, 1.08 for the EUR/CHF, respectively). It was a non-event. I mean, I'm still trying to figure out what point you're making. Are capital market distortions new? Sure, the scale of intervention might be larger. But the scale of everything is larger today. And why do you assume that these distortions are always bad? I don't. They have to be examined on their individual merits. I like the government building roads and subsidizing certain industries. Sometimes it's good business. Maybe buying stock in certain domestic industries is as well. Are shills new? Is an asymetric reward structure new? The basis of the argument against TBTF is moral hazard. Is that unique to the banking system? I've seen it suggested on these very boards to incorporate your company ASAP, in order to prevent personal financial liability. Well, that just might promote higher risk-taking by the entrepreneur. Or what about the house-flippers? Heads I cash in, tails I mail the keys to the bank. Are these people too small to fail? This is our system. I choose to study it as it is rather than compare it to some non-existent ideal.