The Casino Economy Explained
Hell has put forward his opinion that markets are currently in a bubble of mega proportions; something which he terms the casino economy. As anyone that follows his blog knows, I agree with his proposition that most assets are over-valued but disagree with his analysis of today's phenomenon in terms of a traditional bubble. In this post, I will formally develop my arguments. I propose that the current asset market bubble is not driven by greed but by fear; fear of a total political / economic meltdown of the global economy. When we view the stock market, bit coin and gold price go through the roof, we should not think of them as bubbles that will eventually deflate but as an ever growing price for insuring against catastrophic financial collapse. Similarly, when we view the apparently irrational boom in momentum driven assets, we should not think of it as irrational behaviour of dumb people but the rational behaviour of investors who think that the long term does not exist. If c