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February 25, 2014


Luis Enrique

he also concludes "we" are heading for trouble, without really explaining why "we" should be much bothered by falling (or flat) share prices.

it would also have been nice if, instead of referring to QE money sloshing around, he'd have explained how if macro policy deliberately pushes returns on bonds down, you'd expect returns on other asset classes to fall too - so higher share prices now combined with lower future share price appreciation is a natural thing to expect, rather than some looming disaster.

a small question that occurred to me whilst reading that piece - what do share buy backs do to stock market indices? By analogy, suppose the FTSE100 was one company and the index is its share price, then its market cap depends on number of shares outstanding. Is the FTSE100 index more like a share price or a market cap?

Chris Purnell

As the FTSE hit an all time high 14 years ago surely to reach 'an all time high' in 2014 it would need to be circa 9500? If that is the case then we are far from 'bubble' territory.

Ralph Musgrave

Chris, You as for “evidence” that the stock market won’t “gain more from better growth than it loses from less loose monetary policy”. My “evidence” is as follows.

Attempts have been made to boost the US and UK economies by the ridiculous QE route: i.e. printing money and buying privately owned assets. That’s bound to raise the price of those assets by more (for a given rise in GDP) than would occur by a more rational method of boosting GDP (e.g. boosting household spending and/or public spending).

Ivan Petkov

Predicting markets is really easy –post factum. All the journalist are doing it.


All said and done you and Ha-Joon are my two favourite economists out there :-) Wish he'd write a blog as though provoking and intellectually stimulating as yours. And wish you'd write a book, something along the lines of "23 ways Marx explains all that is wrong in the world today" :-)


"stock markets are heading for trouble"

Aren't all stock markets (like Arsenal) "heading for trouble". Isn't that the nature of markets? It's just a question of predicting exactly when that's the tricky part. Ha-Joon Chang doesn't give any dates.


Nice graph!


As Worstall points out, his linking of the FTSE (80% non-UK sales) and the S&P (50% non-US sales) with the UK and US economies is also...misleading shall we say.

He is an embarrassment to Cambridge economics.

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