Taming Speculative Capitalism

In contrast to the other two psychological causes, speculative contagion has a natural end. A speculative bubble, sustaining itself solely by reaction to price increases, cannot go on forever.

In the view of Iraq, the claim unit is overly speculative.

On the other hand, the estimate of the amount required would have to be speculative.

Nicolas Sarkozy, the leading contender in the French presidential election, recently lashed out against what he called speculative capitalism, and says he wants to moralize the financial zone created by the euro. What does Sarkozy mean by speculative capitalism?

In the cities, a lot of the cost of property is actually wrapped up in its speculative value.

Third, and no less important, is the speculative contagion that underlies any bubble. The current boom has seen contagion

The notion that the prenatal transmission of PTSD risk is adaptive is still speculative, but I find it rather poignant.

Concerned about the excessive volatility of speculative short term capital flows and the contagion effects in financial markets in times of crisis,

Since the exact ratio of men to women within the framework of the total population is unknown, these conclusions are rather speculative.

Their speculative frenzies ruined shareholders, customers, and the economy. Anger has come to focus on banking executives huge compensation packages, composed largely of bonuses.

With non OPEC oil producers following suit, oil production was approaching full capacity in the first quarter of 2005, thereby heightening speculative pressures for price increases.

NEW HAVEN People frequently ask me, as someone who has written on market speculation, where the next big speculative bubble is likely to be. Will it be in housing again?

Speculative bubbles do not end like a short story, novel, or play. There is no final denouement that brings all the strands of a narrative into an impressive final conclusion.

In such circumstances, the decision on the anticipated future effects of logging is by necessity speculative, with only subsequent events bearing out whether or not the initial assessment was correct.

One has to be very speculative, and many of my colleagues would say that we should not do this speculation, that we should simply keep our counsel until we know more.

However, experience continues to show that financial markets often fail to meet this challenge in emerging markets, as they tend to be pro cyclical and subject to speculative and herd mentalities.

Today s challenges finance, food, and energy, for example are many. Yet they share a root cause, whereby speculative and often narrow interests have superseded the common interest, common responsibilities, and common sense.

We've been surrounded by images of space our whole lives, from the speculative images of science fiction to the inspirational visions of artists to the increasingly beautiful pictures made possible by complex technologies.

The Committee considers, however, that this default on the part of the State party cannot be imputed to the complainant and, moreover, that whether the Court's consideration would have been different remains speculative.

Speculative bubbles are the visible manifestation of that temptation. As the bubbles burst and they always do false prosperity is exposed and the defensive tactics of market manipulation become both urgent and seemingly logical.

In addition to having a suboptimal exchange rate arrangement, the more vulnerable ESCWA member countries are unable to defend their currencies under the current conditions of free capital movement and intensified international speculative activities.

The recent equity market rally is largely divorced from fundamentals and is driven by speculative, debt financed purchases. The outlook for corporate profits remains weak the country s equity supply is growing and valuations are stretched.

All seemed to have something to do with speculative price movements that surprised most observers and were never really explained, even years after the fact. They also had something to do with government policymakers mistakes.

In the first half of 2008, commodity prices moved up quickly and plummeted just as fast in the second half of the year. There may well have been speculative behavior that contributed to the rapid swing.

This difference is a result of the monopolistic structure of the wholesale segment of distribution that allows for speculative behaviour and in the case of franchising difference is due to changes in consumers' preferences and tastes.

Mounting imbalances in the US were the mirror image of those in China a massive shortfall of domestic saving, unprecedented current account deficits, excess debt, and an asset dependent economy that was ultimately built on speculative quicksand.

Second, many argue that raising interest rates would trigger a flood of speculative capital from low yielding advanced economies. With the PBOC unable to sterilize the inflows, upward pressure on the renminbi s exchange rate would threaten competitiveness.

These, together with the external shocks triggered by the volatility of speculative capital flows, drastic terms of trade adjustments and even inflows of remittances, make the potential benefits of structural adjustment and stabilization policies difficult to attain.

Through all of this, governments have strengthened bank regulation only slightly, leaving key issues like liquidity creation, exposure to derivatives, and tax avoidance largely unaddressed. Today, 98 of the 750 trillion in global liquidity is in speculative markets.

Speculative pressures are likely to have been at work, influencing the decisions of OPEC and many others. Although changes in market psychology are difficult to understand, the broad concerns that underlie such episodes of irrational exuberance are almost always clear.

The new European Financial Stability Facility (EFSF) is not up to the task. And enlarging the EFSF to an appropriate size would require massive additional French borrowing, which could well place France itself at the receiving end of a speculative attack.

Instead, Europe developed the euro, which solved the problem of speculative attacks and monetary credibility by replacing individual currencies with a new one. It was impossible to short the lira or the franc because there were no more lire or francs.

Today s financial turmoil and economic downturn are highlighting the EMU s advantages in several important ways. First, the euro has eliminated the possibility of exchange rate turbulence and speculative currency attacks that more vulnerable economies could have expected in the current turmoil.

This means making capitalism work better, and making it clear that there is no threat of protectionism. But the rationale must be to get the world economy out of its current risky situation, not to propel us into yet another speculative bubble.

So Sarkozy shouldn t be lashing out against speculative capitalism. On the contrary, he should be asking how capitalism can be developed even further, with new institutions in finance and insurance to deal with the very important problem that his campaign has highlighted.

Krugman would argue that, if the economy remains weak, interest rates will remain low, despite high and rising public debt. Fear of a speculative attack by so called bond vigilantes is unwarranted, he would claim, as the US and the UK show.

What China lacked was not demand for consumption goods, but a supply of high quality financial assets. It found these in the US, mainly in the form Treasury and other government backed securities, in turn pushing other investors into more speculative investments.

In contrast, the Center for American Progress report devoted very little space to financial sector reform in the authors view, such issues hardly seem to be a high priority. Van Hollen does have some concerns and proposes a financial transaction tax to reduce speculative activities.

The essence of a central bank s lender of last resort function has traditionally been the provision of unlimited funds. Because there is no limit on the amount of dollars that the Fed can create, no market participant can take a speculative position against it.

It is a lot easier to exit from a fixed exchange rate regime when the pressures on the currency are upwards. While it may seem hard to imagine that the speculative tide might ever turn against China, exchange rate pressures can turn in an instant.

While the central bank should stand ready to intervene to prevent bank runs, it should let the financial sector run itself with a light regulatory hand, viewing itself not as a chaperone but rather as the designated driver in the case of speculative excess.

Banks also provide critical services to governments and business, by providing direct access to global buyers of debt and equity, and by establishing large, consistent markets of buyers and sellers. Some characterize these activities as speculative trading, and even caricature financial markets as casinos.

Likewise, the deterioration of international relations before World Wars I and II was marked by governments increased propensity to use economics as a tool of power politics. In 1911, the diplomatic crisis over Morocco was accompanied by a French speculative attack on German financial markets.

Silence can be presumed to be tacit acceptance that rapid increases in long term asset price are warranted. National leaders must speak out, and they must match their words with concrete actions, to help signal to the public that the speculative bubble cannot be expected to continue.