By Robert J. Shiller in The NY Times
THE risk of a double-dip recession hasn’t abated, even after news of the huge European bailout in response to the Greek debt crisis.
World markets soared initially on the announcement of the nearly $1 trillion rescue plan, and then declined. But as the economist John Maynard Keynes cautioned long ago, such market reactions are basically a “beauty contest” — with investors trying to predict the short-term reaction that other investors think still other investors will have.
In other words, don’t view these beauty contests as a heartfelt response to a fundamental change in the economy.
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