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The Annotated History Of Global Volatility
While Janet Yellen is bust ignoring "noisy" inflation and dismissing low volatility as indicative of any complacency, Goldman is a little more concerned. The decline in economic and asset market volatility this year from already low levels in 2013 has been striking, which as Markus Brunnermeier states, means "the whole system is more prone to a financial crisis when measured volatility is low, which tends to lead to a build-up of risk in the background – the so-called 'volatility paradox'."
"In general, extremely low risk premiums right now are somewhat concerning... If there is a smooth adjustment towards more normal levels of risk premium, I believe the financial system can handle it. But if risk premiums suddenly move back to high levels... the question is how the financial system will react.”
Allison Nathan: Does low market volatility breed complacency and excessive risk taking?
Markus Brunnermeier: Yes. I have coined this dynamic the "volatility paradox." When measured market volatility is low, people feel empowered to take on more leverage and more liquidity mismatch, which leaves the whole system more prone to sharp movements. This dynamic occurred during the “Great Moderation.” During that period, fundamental and asset volatility was generally low and market participants took on much more leverage.
Source: Goldman Sachs
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Submitted by Tyler Durden on 08/14/2013 12:49 -0400
It can go on for awhile. But increasing calm also sets off a primitive alarm system in the brain. The 'herd' begins to grow tense. Eventually somebody will lose it, "I can't TAKE it anymore!", and they'll take off. Within minutes you have a stampede.
those maggots would grape their own mother for a bonus
They say death takes you to a better place but I doubt it
After that they killed his mother, and never spoke about it
And listen 'cause the story that I'm telling is true
'Cause I was there with Billy Jacobs and I raped his mom too...
Modern Monetary Theory often referred to as MMT to its many believers removes much of the risk ahead and guarantees that we will always be able to muddle forward. MMT also known as neochartalism is a economic theory that details the procedures and consequences of using government-issued tokens and our current units of fiat money. Newly acquired tools like derivatives and currency swaps allow us to print and manipulate away problems.
While reading an article about the growth of debt in China's non-financial sector I was forced to reflect on how debt is effected by the interest rates. In Europe the ECB had to step in to halt the economic collapse of Spain, Italy and several other countries that were on the brink. What you pay in interest on debt does matter except in the manipulated land of MMT. Have we been lulled into complacency by the extraordinary actions taken by central banks and governments over the last six years? This is a key question we must face. More on this subject in the article below.
http://brucewilds.blogspot.com/2014/01/have-we-been-lulled-into-complace...
A tidbit I just noticed today. If we dont make a new high or low by end of day Monday, it will be the smallest total range (High - Low Divided by Close)percent for a month in the Dow in over 100 years. Thats some pretty low volatility and quite ugly facillitation.