http://bit.ly/1tExciOScenes From a (Suddenly) Nude Beach
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Warren Buffett s classic observation that You only see who s swimming naked when the tide goes out is being tossed around more frequently these days, as the world gets yet another deflation scare. Zero Hedge just published a great piece on this topic, which should be read in its entirety. In the meantime here s a summary of the story with a few added bits. Let s begin with the common sense premise that overly-easy money sends a false-positive signal to market participants, leading them to buy and build things that maybe shouldn t be bought or built. Then, when money goes back to a more reasonable price, the bad decisions (malinvestment in economist-speak) are revealed and financial turmoil ensues. Today s situation has its roots in the 1980s, when the developed world got too lazy to live within its means and started borrowing way too much money. It then tried to inflate away its debts by creating a tidal wave of new currency and pushing interest rates down to unnaturally low levels. F - emerivest partners |
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