We Have No Idea What Our Capital is Worth

"That headline makes quite a statement. But it’s true. The stock of so-called “financial capital,” or wealth — all the financial assets out there, which are ultimately claims on real capital — represents only the most tenuous long-term approximation of what our real capital is worth.

Certainly true: the stock (total dollar value) of “financial capital” goes up (in fits, starts, and reverses) over the decades as real capital is accumulated. But beyond that rough, big-picture relationship, the total value of financial assets tells us very little about the total value of real assets.

Why?"

http://angrybearblog.com/2014/05/we-have-no-idea-what-our-capital-is-worth.html

Capital Inflows and Booms in Asset Prices

"This is a tidy and useful addition to the literature on how high levels of international capital flows generate financial instability."

"Policymakers have long been concerned that large capital inflows are associated with asset-price booms. This column presents recent research showing that the composition of capital inflows also matters. The association between capital inflows and asset-price booms is about twice as strong for debt-related than for equity-related investment. Policymakers should therefore pay attention to the composition of capital inflows, since debt-related inflows may still undermine financial stability even if they do not result in an overall current-account deficit."

"In general, to monitor the threat of capital inflows, policymakers look at the current-account balance. If it is in surplus (as is the case in Germany today) or the deficit is low, they assume that capital inflows do not pose a risk to financial stability If, on the other hand, the deficit is large, they worry about the potential risk and, only then, they may look at the composition of capital inflows.

Our research shows that this view is misleading."

http://www.nakedcapitalism.com/2013/12/capital-inflows-and-booms-in-asset-prices.html

Japan; from quagmire to Abenomics to collapse! Part I, II, III

"The second thing the reader needs to know about economics is that debt can have a positive or a negative effect on wealth creation, depending on what kind of deb. If the debt is made with the intent of making a subsequent sale, id est. a business loan, it will help increase capital accumulation. However, if the debt is taken on to fund current consumption it will decumulate the capital stock and make society poorer. (...)

Japan misallocated large amounts of capital in the 1980s. Instead of dealing with it head-on, they tried to paper over the problems with fiscal expansion, lowering interest rates to laughable levels and expanding the central bank balance sheet. This story should be familiar to all Americans and Europeans by now as the western economies did the exact same thing in the 2000s.

All it did for Japan was to lift public debt to levels that eat away all tax revenue."

Part I http://www.bawerk.net/#post16
Part II http://www.bawerk.net/#post17
Part III http://www.bawerk.net/#post18

Trystero - "Kup akcje i wygraj wycieczkę do Las Vegas"

Ten wpis pokazuje stan części polskiego rynku kapitałowego, jakość niektórych bardzo małych spółek poszukujących kapitału od nie w pełni profesjonalnych graczy, jakość nadzoru i kontroli w Alternatywnym Systemie Obrotu jakim jest New Connect oraz to, czego człowiek się nie spodziewa po niektórych spółkach, choćby najdziwniejszych.

http://blogi.bossa.pl/2012/06/15/kup-akcje-i-wygraj-wycieczke-do-las-vegas/