Article Image
News Link • Government

Both The Market and Government Are Irrational

• http://www.globalresearch.ca, by Dr. Paul Craig Ro
 

One of the great economic myths is that markets are rational. Not a day passes without this myth being disproved scores of times, but the myth persists.

For example, today (March 14) Bank of America/Merrill Lynch reported that “yesterday US markets started the day off with a strong rally after the solid retail sales report. . . . tailwinds are helping boost global equity markets today.”

The “solid retail sales report” for February consists of a 1% nominal gain. That is, the increase is not deflated by the month’s inflation rate, which will be released on March 16. In other words, if very much of the 1% nominal gain in retail sales is due to higher prices, the inflation adjusted gain will not be statistically significant. The “rational market” took off without waiting to find out whether the gain was real.

Moreover, as statistician John Williams has established, the official Consumer Price Index (CPI) understates inflation. If an honest measure of inflation was used, retail sales could be in negative territory.

Join us on our Social Networks:

 

Share this page with your friends on your favorite social network:


Purse.IO Save on All Amazon Purchases