IT, have held down inflation, and excess liquidity has instead been bottled up in asset markets.
ECONOMIST: Yesterday's financial architecture needs refurbishing
In contrast, we have long known of the existence of fat tails in asset markets.
For others, it encapsulates a prolonged period of high volatility (in either economies or asset markets).
Such a scheme might increase trust in banks and take some pressure off asset markets.
The central bank is also worried that speculative bubbles might already be starting to form in some asset markets.
ECONOMIST: But already there are tensions over tighter money
The Federal Reserve is doing almost everything in its power to entice investors to speculate in overpriced asset markets.
Most bubbles in asset markets are bubbles in price, with too much money being thrown at too few earnings.
FORBES: Buy Now, Pay Later: How the Fed's Tinkering Created A Global Crisis
Third, for those few companies that are still solvent, there are no liquid asset markets in which to invest.
Asset markets do not work as well as those for consumer goods.
This blog is not about the equity, bond, or property asset markets.
The policy has certainly had a pronounced effect on asset markets, however.
If central banks focus on asset markets when they rise as well as when they fall, they will remove much of the froth.
After so many financial crises in the past 40 years most reasonable people would now accept that bubbles in asset markets can exist.
Money will slosh in and out, driving underdeveloped local asset markets up and down and affecting the level of demand in the real economy.
First, I fear that the concept of the new normal confuses the distribution of economic outcomes (and forecasts thereof) with the distribution of asset markets.
We also believe that ultimately the various structural factors negatively affecting demand outside Brazil will continue to manifest themselves, despite the recent improvement in asset markets.
However, with nominal growth slowing, the global population aging and developed economy governments reluctant to issue large amounts of debt this dynamic will affect larger and more traditionally stable asset markets.
The question is whether they can stop asset markets going wild in the hope of averting trouble later, or must wait for a crash and then deal with any macroeconomic effects.
Likewise, the bubbles and crashes that have afflicted asset markets ever since Holland's tulipmania in the 17th century and right up to the subprime-mortgage bubble are also cousins of the prisoner's dilemma.
If traders are given licence to use leverage to buy into rising asset markets, then the trading division should be charged a cost of capital high enough to reflect the risks involved.
Central banks already look at asset markets for advance signals about the strength of the economy, but there are two reasons why central banks might want to respond more directly to increases in asset prices.
As Adam Posen, a member of the MPC, said this week, the policy has contributed to preventing a deflationary spiral and encouraged an improvement in credit conditions and asset markets over the past six months.
It is desirable for everyone to have some share of their pension income derived from a pay-as-you-go scheme, argues David Miles, an economist at Imperial College, because it provides an insurance against unpredictable downturns in asset markets.
They have come thick and fast but a common thread is that the best way for the BOJ to jump-start the economy and affect inflation and inflationary expectations is through asset markets notably the stockmarket by the use of its own balance sheet.
That model is fine, but the model that overlays on that involves substantial exposure to asset security markets.
In addition to this, the mortgage and asset backed markets still have a way to go before normalizing.
If the fiscal-cliff debate lingers, some analysts expect gold to act as a risk asset and track markets like equities, while others look for the precious metal to regain its safe-haven appeal.
FORBES: FOCUS: Gold Market Focused On Fiscal Cliff--Safe Haven Or Risk Asset?
The emerging markets asset class has sustained average annual growth rates of 16% over the past decade, points out Jan Dehn, an economist at Ashmore Group, a large emerging markets investment firm in London.
FORBES: Outside Of Treasurys, Emerging Market Debt World's Best Buy
Among its best performing funds are the Virtus Multi-Sector Short Term Bond Fund run by Newfleet Asset Management and its Emerging Markets Opportunities Fund run by Vontobel Asset Management.
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