This series of articles was authored to point out some of the often hidden, unrecognized, ignored, or forgotten assumptions underlying the functioning of markets in capitalism. Additionally, ways in which markets fail in their intended purpose also feature prominently.
Markets frequently fail, despite their pristine reputation among capitalists. One way is the many actions taken by buyers and sellers to tilt a transaction in their favor. These visible hands create asymmetries between the parties. Jason Voss, CFA, explains.
Markets are usually not systemic. Instead, from the bird’s-eye perspective of "Capitalism," many businesses are "opportunities" in the same way that it feels good to hit yourself in the head with a hammer: It's much better once you stop.
Markets are useful but imperfect, says Jason Voss, CFA. One imperfection is that they assume fungibility. Assuming that a dollar spent on one thing is equivalent to a dollar spent on something else has serious consequences for investors.
Markets assume a context entirely out of view of their participants, which can have deleterious effects for both suppliers and demanders, Jason Voss, CFA, observes in the latest installment of his Where Markets Fail series.
Markets are useful, but imperfect, Jason Voss, CFA, explains in the first installment of his Where Markets Fail series. One glaring flaw is their inability to discount the future. This results in many deleterious and often long-term consequences.
A working group on risk-free rates at the Bank of England wants greater focus on adoption of the Sterling Overnight Index Average. "It would be appropriate to begin considering more granular milestones with a more targeted approach," according to minutes from the group. Futures & Options World (subscription required) (13 Dec.)
Congress took a break for the holidays without a plan for heading off a partial shutdown of the US government next week. Talks on keeping the government running haven't progressed since President Donald Trump said he is willing to take the blame for a shutdown if he doesn't get funding to build a wall along the border with Mexico. Politico (13 Dec.)
Almost half of economists in a recent poll for The Wall Street Journal said the risk of a trade war between the US and China was their biggest concern for the US economy in 2019. Other concerns were disruption to financial markets, business-investment slowdown and fallout risk from an increase in interest rates. The Wall Street Journal (tiered subscription model) (13 Dec.)
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