‘There’s No Such Thing As A Free Market.’ Imagine A Future Where Asset Prices Are Administered
Call it a requiem.
Or a pseudo-lament.
Or maybe just an obituary dressed up as an FX strategy piece. But whatever you want to call it, Deutsche Bank's George Saravelos penned a short critique called "the end of the free market" late last week that contains a series of poignant lines worth excerpting at a historic juncture for the global economy.
This little gem found its way to me on Monday evening, just after I put the finishing touches on "Against The Gods: ‘Historically A Losing Proposit
So “free market pricing is dead.” Got it. It died at the hand of central banks. Pricing is no longer true, at least in any way we can know.
But, erstwhile contrarians might point out that the decimation of capital markets has not been priced in. The debt service/failure of just the US energy sector is boggling (not just of the mind). Yes, the Fed can provide liquidity to lenders, but rolling over oil service debt is not (yet) in the playbook as far as I can tell.
It is the last gasp of denial before system failure is acknowledged. You should review Kasarian on “Greek accounting”, and how full of crap THE EU was.
“High real economy volatility but very low financial volatility” will lead to overwhelming societal volatility.
Zombification will precede a total collapse…. Yeah H…….You are not one for predictions…hope that was not your first attempt…I will reread this in the AM.. Nite !!!
Very depressing
It’s been the reality since 2009. So much of the vaunted share market rally was thanks to margin expansion and share count reduction. Absolute profit growth (as opposed to EPS) has mostly been rather “tepid”. Looking at the stock market, you’d never guess that.
The reason why capitalism is politically acceptable is contingent on the economic ladder being traversable in both directions. If Central Banks indefinitely suspend price discovery in pursuit of maintaining the status quo, then the rich are no risk of ever losing their position, and the risks will be pushed to the social and geopolitical spheres (depending on whether populist anger is vented internally, where it belongs, or manipulated against foreign interests).
That said, so long as everyone confines their “protesting” to twitter rants, the 0.1% should feel pretty good about their odds of beating the rap.
Outstanding comment, Privateer. Very well said.
If I recall my history, one of the discussions/fears during World War 2, was the economics fraternity pondering whether the US and the world would go back to depression era economics post war. Just as in preparing for war, policy forecasters often worry about the last disaster. I am by no means saying that there won’t be problems- far from it. But most likely they are challenges from events and trends that we cannot foresee.