Significant news about peso exchange rate

[expatinowncountry]

I think the market works just fine.

If you are a country who misbehaves, you have to pay more to issue debt. If you are an investor and buy that debt, you are at risk the country might misbehave with you. When the misbehavior happens, you have specialists who come in and will pay you something for your worthless Argentine papers. Those specialists try to get the government to behave. The country fights back with more misbehavior, sending borrowing costs even higher.

It is all an endless circle. No matter what piece of the puzzle you find yourself in, the market ensures you get what you deserve. There's no free lunch.

Yeah, you are right... markets work just fine. We learned that in 2008. It was the government intervention and excessive regulation that took all the financial companies down (and cut to half the pension funds of billion of workers)...

Maybe you could try to give a more balanced view of market failures versus government failures so your statement does not sound ridiculous in the light of what we have experienced in the last few years...

 

[solerboy]

Yeah, you are right... markets work just fine. We learned that in 2008. It was the government intervention and excessive regulation that took all the financial companies down (and cut to half the pension funds of billion of workers)...

Maybe you could try to give a more balanced view of market failures versus government failures so your statement does not sound ridiculous in the light of what we have experienced in the last few years...

I thought it was inappropriate mortgage lending and the bundling of financial instruments that brought the financial companies down in 2008 , or was that a diffeernt story ?

Taxpayers will spend a life time paying for the Government Intervention which was needed to stop the whole system collapsing. I didnt see the market working just fine then.

 

[expatinowncountry]

I thought it was inappropriate mortgage lending and the bundling of financial instruments that brought the financial companies down in 2008 , or was that a diffeernt story ?

Taxpayers will spend a life time paying for the Government Intervention which was needed to stop the whole system collapsing. I didnt see the market working just fine then.

I meant to be sarcastic given the naivete of the person who was claiming that markets always work well and the government always get it wrong

 

[solerboy]

I meant to be sarcastic given the naivete of the person who was claiming that markets always work well and the government always get it wrong

Bit early for sarcasm, but I normally love it, keep it up

 

[surfing]

I thought it was inappropriate mortgage lending and the bundling of financial instruments that brought the financial companies down in 2008 , or was that a diffeernt story ?

Taxpayers will spend a life time paying for the Government Intervention which was needed to stop the whole system collapsing. I didnt see the market working just fine then.

We'll never know if the whole system would have collapsed or not because companies that by laws of the free market rightly SHOULD have collapsed and gone bankrupt were "bailed out" by government in direct defiance to the wishes of the VAST majority of citizens. This was the biggest swindle of funds in the history of mankind.

 

[GS_Dirtboy]

Taxpayers will spend a life time paying for the Government Intervention which was needed to stop the whole system collapsing. I didnt see the market working just fine then.

I think what el expatriado is referring to is "fine" in the economic sense. I understand economics to be a zero-sum game. The decisions that were made by the mortgage lenders to bundle and sell risky portfolios fueled an invester drive to buy more of those assets. Markets working fine.

The more investors purchased, the higher the asset price went. This is completely contary to how product markets work where higher prices mean lower demand and this is exactly what was mis-understood by Greenspan. This reverse demand curve creates the real estate bubble. Markets working fine.

Companies invest in those portfolios (lots of retirement income) and those portfolios eventually collapse because there is not enought real value to support those prices. Market resets itself. Markets working fine.

Yes, there were a lot of people who lost a lot of money in 2008. That doens't mean the markets didn't work. An analogy of "Markets Not Working" is putting your 16-year old who has a drivers license in the seat of a Formula 1 car and when they crash blaming it on the car. The car works just fine, it's the driver that didn't know what they were doing.

On a micro scale, Joe and Jane Smith from Kansas (or the investment officer of their company) put their life savings into those investments hoping they'd increase. Didn't happen. They lost all of their money. Joe and Jane made a poor investment choice. Markets worked just fine. It was Joe and Jane that didn't understand the investment.

 

[expatinowncountry]

We'll never know if the whole system would have collapsed or not because companies that by laws of the free market rightly SHOULD have collapsed and gone bankrupt were "bailed out" by government in direct defiance to the wishes of the VAST majority of citizens. This was the biggest swindle of funds in the history of mankind.

You have to admit that it was a TOUGH call... we were not talking about car makers, but the companies that intermediate everyone savings. Yes you could have let the system takes its course risking that everyone lose its pensions and that the whole payment system collapse, getting us to the old good days of barter economies. Who wants to trade some econ lessons for some bread and butter (dulce de leche is also welcomed), any taker?

 

[surfing]

I think what el expatriado is referring to is "fine" in the economic sense. I understand economics to be a zero-sum game. The decisions that were made by the mortgage lenders to bundle and sell risky portfolios fueled an invester drive to buy more of those assets. Markets working fine.

The more investors purchased, the higher the asset price went. This is completely contary to how product markets work where higher prices mean lower demand and this is exactly what was mis-understood by Greenspan. This reverse demand curve creates the real estate bubble. Markets working fine.

Companies invest in those portfolios (lots of retirement income) and those portfolios eventually collapse because there is not enought real value to support those prices. Market resets itself. Markets working fine.

Yes, there were a lot of people who lost a lot of money in 2008. That doens't mean the markets didn't work. An analogy of "Markets Not Working" is putting your 16-year old who has a drivers license in the seat of a Formula 1 car and when they crash blaming it on the car. The car works just fine, it's the driver that didn't know what they were doing.

On a micro scale, Joe and Jane Smith from Kansas (or the investment officer of their company) put their life savings into those investments hoping they'd increase. Didn't happen. They lost all of their money. Joe and Jane made a poor investment choice. Markets worked just fine. It was Joe and Jane that didn't understand the investment.

Where is the bailout for Joe and Jane? You can't bail out one set of investors and not the other if you are truly letting the free market rule. Don't get me wrong --- my opinion is that NOBODY should have been bailed out. We would be living in a totally different universe now if the companies and investors who through their "poor investment choices" were left to pay the consequences. That, my friend, is the free market; you can't have it both ways: profits are private and losses are public; that's not free market that's market fascism.

 

[surfing]

You have to admit that it was a TOUGH call... we were not talking about car makers, but the companies that intermediate everyone savings. Yes you could have let the system takes its course risking that everyone lose its pensions and that the whole payment system collapse, getting us to the old good days of barter economies. Who wants to trade some econ lessons for some bread and butter (dulce de leche is also welcomed), any taker?

That is exactly the kind of hyperbole that was used to scare the politicians into voting of this swindle. Not a tough call at all. Some would have sunk some would have swum. The "whole system" would have NEVER gone down. What you are talking about is disaster capitalism and the "shock doctrine".

 

[expatinowncountry]

I think what el expatriado is referring to is "fine" in the economic sense. I understand economics to be a zero-sum game. The decisions that were made by the mortgage lenders to bundle and sell risky portfolios fueled an invester drive to buy more of those assets. Markets working fine.

The more investors purchased, the higher the asset price went. This is completely contary to how product markets work where higher prices mean lower demand and this is exactly what was mis-understood by Greenspan. This reverse demand curve creates the real estate bubble. Markets working fine.

Companies invest in those portfolios (lots of retirement income) and those portfolios eventually collapse because there is not enought real value to support those prices. Market resets itself. Markets working fine.

Yes, there were a lot of people who lost a lot of money in 2008. That doens't mean the markets didn't work. An analogy of "Markets Not Working" is putting your 16-year old who has a drivers license in the seat of a Formula 1 car and when they crash blaming it on the car. The car works just fine, it's the driver that didn't know what they were doing.

On a micro scale, Joe and Jane Smith from Kansas (or the investment officer of their company) put their life savings into those investments hoping they'd increase. Didn't happen. They lost all of their money. Joe and Jane made a poor investment choice. Markets worked just fine. It was Joe and Jane that didn't understand the investment.

Sorry, economics is not a zero sum game, have you become Argentinean? There is value to be made often for both side in a transaction. The person who saves (lend) and the person who invest (borrows) can both gain. Imagine, you are young and have no financial capital, you borrow to study so you can work later. Who is lending you? The bank. To whom the money in the bank belongs to? Someone who has exactly the opposite problem than you... has accumulated financial wealth (many years of work) and needs that someone gives him an income tomorrow when he retires. You both win trading your future work for his future income.

When the price of something increase could mean many, many, many things... short supply, large demand, expectations about future demand or supply. It is the same for financial assets than for "normal" goods. If you expect the price of a car is high you may buy it because you are expecting to be even higher tomorrow. It is very hard to extract the signal prices are trying to transmit. And it is even harder when you are talking about return on assets that will depend on many future variables.

Market do not work fine because there are many market failures... going from monopolistic power to asymmetric information just to mention two. Your example of the Kansas fellow would be nice if that was a description of what happened in 2008... it was not... far more sophisticated economic agents made (what ex-post were) very bad financial decisions...