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Just, one more thing... how did he go from the 10% yield ($100M / 10M = 10% yield) to "if interest rates are 5% instead of 10%, then you would pay $200mm for the business ($10mm/$200mm = 5%)." Is he simply interchanging the word "yield" with "interest rates" or actually talking about the central bank?
> It’s hard to sustain a bubble for four years. Says who? As Wilson observes, "Since the financial crisis of 2008, policy makers in the developed world have kept interest rates at or near zero. They have flooded the market with cheap money in an attempt to heal the wounds (losses) of the financial crisis and incent business owners to invest and grow their businesses." It's kind of amazing that he doesn't see how year…
> It’s hard to sustain a bubble for four years. Says who? As Wilson observes, "Since the financial crisis of 2008, policy makers in the developed world have kept interest rates at or near zero. They have flooded the market with cheap money in an attempt to heal the wounds (losses) of the financial crisis and incent business owners to invest and grow their businesses." It's kind of amazing that he doesn't see how year…
> It’s hard to sustain a bubble for four years. Says who? As Wilson observes, "Since the financial crisis of 2008, policy makers in the developed world have kept interest rates at or near zero. They have flooded the market with cheap money in an attempt to heal the wounds (losses) of the financial crisis and incent business owners to invest and grow their businesses." It's kind of amazing that he doesn't see how year…
The _really_ scary thing is that as rates are moved close to 0, inflation seems to slow down. This is true both in the US (almost 0 rates, low inflation) and in the EU (a bit higher rates, but almost 0 inflation in the last few months). If deflation kicks in, then this flood of free money will evaporate very quickly.
The Eurozone is looking at mild deflation, and it will do a lot of damage. Deflation in the US is nearly impossible, because the FED will just purchase assets until the problem of low inflation goes away. Deflation in the Eurozone will be bad mainly because it will make the personal and public debts of the debtor nations unbearable. Not because "money will evaporate very quickly".
Bottom line is interest rates can only be held low because alternatives around the world don't exist. I'm also amazed how alot of people think the fed saved the economy & created more wealth : as Jim Rogers says they only know how to print).
Finally, I think the derivatives were around 600bill upto Lehman downfall. I was astonished to find that they're now a quadrillion! Buffet called derivatives financial weapons of mass destruction. I think this world might experience this interesting concept.
http://www.pinnacledigest.com/blog/dscaroknight/chart-below-...
Cheap money (or, low rates with "safe" bond markets) + high growth tech = sky high valuations - got it, Fred. Just, one more thing... how did he go from the 10% yield ($100M / 10M = 10% yield) to "if interest rates are 5% instead of 10%, then you would pay $200mm for the business ($10mm/$200mm = 5%)." Is he simply interchanging the word "yield" with "interest rates" or actually talking about the central bank?
Earlier quoted context omitted.
The Eurozone is looking at mild deflation, and it will do a lot of damage. Deflation in the US is nearly impossible, because the FED will just purchase assets until the problem of low inflation goes away. Deflation in the Eurozone will be bad mainly because it will make the personal and public debts of the debtor nations unbearable. Not because "money will evaporate very quickly".
Deflation will be bad because nobody will by something today when they think it will be cheaper tomorrow.