So what about Bain Capital, Romney’s shop? Here from their December 10, 2012 report (PDF; hat tip to the always-remarkable Izabella Kaminska, and to Climateer Investing).
World awash in nearly one quadrillion of cheap capital by end of decade, according to new Bain & Company report
Their takeaways include:
The capital glut will be accompanied by persistently low real interest rates, high volatility and thin real rates of return.
Sound like secular stagnation to you?
Also:
The ever-present danger of asset inflation will contribute to an overall steepening of the investment risk curve… companies will need to strengthen their bubble-detection capabilities
In short, there’s a huge amount of money floating around out there relative to income and production. (In Steve World, all financial assets embody money, and the money stock is the total value of financial assets — including dollar bills, deeds, or other formal financial claims — regardless of how currency-like those things are. Equating currency and currency-like things with money is conceptually incoherent.)This is an excerpt. If this is your interest, read the whole thing and follow the link at the end.
Hint: it’s about what the herd does with all that money.Asymptosis
The Global “Capital” Glut
Steve Roth
Whoever wrote this at Bain is clueless. "Capital glut" is a meaningless term when applied to money or money equivalents as it is here. Moreover, it is not a "glut" that is causing interest rates to be low, but low interest rates (a policy condition) that is causing this so-called "glut."
ReplyDeleteWhat idiots.
They all pretend like they're so smart, but they know nothing and are shitty investors to boot.
Quite correct. The globe is a closed economy, which means that for every financial asset there is a corresponding liability. It is not possible for a glut in excess of liabilities to exist.
ReplyDeleteWhat their broken semantics is really addressing is swings in wealth inequality: the rising magnitudes of [so far, still acknowledged] distributed liabilities concentrated as more localized assets.
ReplyDeleteAs Steve Hansen [EconIntersect] loves to say: "this will continue ..... until it doesn't."