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  1. #41
    mountain surfing nomadic's Avatar
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    Quote Originally Posted by FDG View Post
    In 50 years finance will probably (hopefully) be reduced to what is strictly necessary to manage and/or avoid risk ever-present in the real economy, thus the fluctuations in the economy will be much smaller. Can't really try to predict any other bullet point, too far from my area of knowledge.
    if you look at studies done on biases and heuristics, you will find that the gap between true risk and perceived risk is smallest in the financial markets.

    when you go into other fields such as management, law, advertising, etc... that gap is measured to be much wider.

    of course, there's serious flaws in regulation of financial markets for sure. but in general, people "lie to themselves" less, when people put their money where their mouth is. and that is something the financial markets definitely advocates.

  2. #42
    pathwise dependent FDG's Avatar
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    Quote Originally Posted by nomadic View Post
    if you look at studies done on biases and heuristics, you will find that the gap between true risk and perceived risk is smallest in the financial markets.

    when you go into other fields such as management, law, advertising, etc... that gap is measured to be much wider.

    of course, there's serious flaws in regulation of financial markets for sure. but in general, people "lie" less, when people put their money where their mouth is. and that is something the financial markets definitely advocates.
    Allright, but who was interviewed in those studies? I can understand a financially educated person and/or an investor having a small spread between real and perceived risk, but I would expect that if an average worker was asked "Do you think that the financial markets' risks will significantly impact your risk of being fired" he would not have a good perception of the situation (perhaps now he would, but 5 years ago - unlikely). Basically, in my post I was referring to how firms are sometimes excessively intertwined with the financial market, even when they don't really get anything out of partecipating; often, it's just because somebody advised them that getting involved would have been a good idea. An example: around here many municipalities invested in weather derivatives basically without knowing shit about it, and lost a shitload of money; thus they had to fire sometimes up to 50% of their administrative staff.
    ENTj 7-3-8 sx/sp

  3. #43
    Artisan Conquerer Halla74's Avatar
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    Quote Originally Posted by FDG View Post
    Creates excessive inflation, erodes the value of savings. Btw Gerbah was saying that the FED & government are buying the debt, not the citizens (the latter case would be totally OK of course)
    Good clarification, thank you for that. I was not thinking along those lines. Cheers! -Halla
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  4. #44
    mountain surfing nomadic's Avatar
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    Quote Originally Posted by FDG View Post
    Allright, but who was interviewed in those studies? I can understand a financially educated person and/or an investor having a small spread between real and perceived risk, but I would expect that if an average worker was asked "Do you think that the financial markets' risks will significantly impact your risk of being fired" he would not have a good perception of the situation (perhaps now he would, but 5 years ago - unlikely). Basically, in my post I was referring to how firms are sometimes excessively intertwined with the financial market, even when they don't really get anything out of partecipating; often, it's just because somebody advised them that getting involved would have been a good idea. An example: around here many municipalities invested in weather derivatives basically without knowing shit about it, and lost a shitload of money; thus they had to fire sometimes up to 50% of their administrative staff.
    well, what I mean is, if the average layman is asked to analyze two questions:

    hold on, i gotta pick up gf from work. she's sick.

    its studies done by kanneman and tsversky on biases and heuristics, choices under uncertainty. bascially, my personal takeaway is that studies show that people are less likely to allow belief biases on an ordinal and cardinal level seep into their judgements when they have money on the line, vs when they don't have money on the line. I will detail the study a little bit later... but here's the authors i am tlaking about (they have many other published articles on this subject, as well as other academics in decision theory)

  5. #45
    pathwise dependent FDG's Avatar
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    ahhh yeah of course I know them, I didn't get you were referring to behavioral stuff. Yeah I get what you mean, the problem then is just one of transparency, basically giving the right information about what people are getting into/buying
    ENTj 7-3-8 sx/sp

  6. #46
    Dreaming the life onemoretime's Avatar
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    Quote Originally Posted by FDG View Post
    Creates excessive inflation, erodes the value of savings. Btw Gerbah was saying that the FED & government are buying the debt, not the citizens (the latter case would be totally OK of course)
    What's the big deal with the government buying back the very bonds it extends?

    Why be concerned with inflation when there is still general agreement that the real money supply is decreasing?

  7. #47
    Artisan Conquerer Halla74's Avatar
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    Quote Originally Posted by onemoretime View Post
    What's the big deal with the government buying back the very bonds it extends?
    OMT, is this equivalent to when a private corporation buys back shares of its stock? That happens fairly often, especially if the firm has a banner year after a period of non-profitability. I've always thought to be a good thing, The company has faith that it wants to own itself and share in its own productivity (profits).

    Quote Originally Posted by onemoretime View Post
    Why be concerned with inflation when there is still general agreement that the real money supply is decreasing?
    Yes. But if money were being printed, and debt wass being bought back, then eventually we would be at a place similar to Germany during WWII, right? My mother (born in 1940) tells me that she had to walk to the store with a fistful of Reichmarks just to buy a book of matches.
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  8. #48
    Babylon Candle Venom's Avatar
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    The federal reserve is a lot more competent than most libertarians give them credit for. The Fed knows what its doing. Money supply is different than money base. Thus the actual amount of money the Fed prints to buy debt, allows to be borrowed etc doesnt actually mean anything until that money is multiplied out through the banking system to become the money supply.

    If we had listened to people like Ron Paul, who get all upset about the Fed printing money, then we would have made the same mistake the depression era Federal Reserve made (too much focus on the money base vs money supply).

    Point is: who cares what some neoclassical economists think about how inflation relates to us printing money and buying our own debt? At the end of the day, inflation is not a problem in the united states. Economics is a descriptive and not a prescriptive social science...

  9. #49
    Dreaming the life onemoretime's Avatar
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    Quote Originally Posted by Halla74 View Post
    Yes. But if money were being printed, and debt wass being bought back, then eventually we would be at a place similar to Germany during WWII, right? My mother (born in 1940) tells me that she had to walk to the store with a fistful of Reichmarks just to buy a book of matches.
    Not so much. Prices rose in Germany because of a huge supply shock known as the Allied Powers. Our crisis is much different - it is one of overexpansion.

  10. #50
    Senior Member Gerbah's Avatar
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    Quote Originally Posted by onemoretime View Post
    What's the big deal with the government buying back the very bonds it extends?

    Why be concerned with inflation when there is still general agreement that the real money supply is decreasing?
    I'm no expert, I just try to follow things to know how to position myself, but according to one analyst I follow, it's possible to have deflation at the same time as inflation. You can check out his videos on youtube: YouTube - jberni1's Channel
    the shoheen ho of the wind of the west and the lulla lo of the soft sea billow - Alfred Graves

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