We do not live in a political and institutional vacuum, you should keep that in mind

by MrOaiki

Every now and then, people on here think they have some “brilliant” thought about the markets. Often it’s something they believe no one else has thought of, and will make them money. And it goes both ways, bulls see a coming surge. Bears have analyzed the markets and “know” they’re in for a large dip. I claim that whoever in here believes he or she timed the markets, is fooled by randomness.

Either way, let’s talk about one common trait among a lot of bearish posts in here…

… They seem to imply we live in a proverbial vacuum. Every time the world doesn’t end, I see posts and comments along the lines “of only the Fed hadn’t X” or “if only the lawmakers hadn’t Y”. Well, ok, interesting theories, but we live in a developed world. Governments will always do X and Y, and institutions are always ready for Y. And if they’re not, the legislative bodies are ready to step in to fix whatever systematic faults need to be addressed. The whole market economy is just a set of laws and regulations, and those laws and regulations are being adjusted and amended all the time. Therefor, any analysis made on the assumption that the world will just stay passive when there’s a risk of it burning, is sloppy and irrelevant.

“The Congress can’t just…”, yes they can. “The Fed can’t keep…”, yes they can. Same goes for the EU. Don’t underestimate the political will of the European Union member states. “They can’t save Italy should their bond yields skyrocket…”, yes they can and they will.

Tl;dr: Whatever laws and interventions needed to stabilize the economy and induce growth, will be set in place. Always. And the means of production in mature economies will manage.

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.