The Efficient Market Theory Is Long Dead (And Central Bankers Are Just Realizing It)

by Tyler Durden
ZeroHedge.com
02/19/2016

The efficient market theory is long dead, according to Bloomberg’s Richard Breslow.

It was a brilliant academic construct. It fit the needs of those who wanted to explain markets to freshmen, make econometric models or make money from the knowledge that it wasn’t reality. >An unfortunate problem arose, however, from how the counter-argument was framed. If markets weren’t efficient they must be irrational or biased. The truth is something very much in-between.

Recognizing that there is mostly gray rather than the polar opposites black and white is even more vital in a world where >exogenous shocking (including central banks) and systemic distortions (computer algos) have made if-then statements decidedly precarious.

If there is one asset where forecasting has proved time and again, over a long period of time, a fool’s exercise it’s oil. This has been demonstrably true for industry experts, policy makers and traders. Don’t protest, it’s a fact. We can only take an educated stab at guessing where this commodity will be priced a year from now.

We then use this enormously important input in pricing everything else. That’s neither efficient or biased: it’s just the best we can do. It’s what makes markets. And, worryingly, policy.

I’ve always been skeptical of the very notion of using long- term market measures of inflation expectations. It seems like a disturbing mis-match of ’’how ya feeling now’’ with “where does it all end.” Belatedly, with great angst, policy makers are realizing that blind faith in a measure which really is just an oil forecast proxy has been misguided.

The Rest…HERE

This entry was posted on Friday, February 19th, 2016 at 1:04 pm and is filed under Conspiracy, Corruption, Economics, Government Evil, New World Order, Oil. You can follow any responses to this entry through the RSS 2.0 feed.