Following on from Friday's post, here is a piece at Project Syndicate which argues that the markets don't really understand QE and that stocks are actually cheap! The fallacy in this article is that as QE hasn't affected monetary growth, its ending will be a non-event. However, QE has affected asset markets as central banks have bought huge amounts of government bonds, which distorts yields on bonds and the real rate of interest. The ending of QE will drive bond yields and the real interest rate up. Increasing bond yields makes the bond market more attractive and, as a result, money flows out of the equity market. An increase in the real interest rate reduces the present value of future cash firms generated by companies, which can only lead to falling stock prices.
According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money. George Selgin , a free banker, takes an opposing view - click here . Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.