Bloomberg has a clever chart, showing just how many traders have never seen an economy not at the zero lower bound:
This cries out, of course, for a callback to my favorite blog comment ever, on Kevin O’Rourke’s What Do Markets Want? Saith the commenter,
The markets want money for cocaine and prostitutes. I am deadly serious.Most people don’t realize that “the markets” are in reality 22-27 year old business school graduates, furiously concocting chaotic trading strategies on excel sheets and reporting to bosses perhaps 5 years senior to them. In addition, they generally possess the mentality and probably intelligence of junior cycle secondary school students. Without knowledge of these basic facts, nothing about the markets makes any sense—and with knowledge, everything does.
Side benefit: read the caption on the Bloomberg chart, and note how bad economic analysis — the specific kind of bad analysis one finds on cable TV business news — gets presented, probably unknowingly, not even as opinion but as fact. “Inexperienced traders will have to tackle markets without the central bank’sartificially low interest rates …” [my emphasis]. Who says they’re artificially low? What does that even mean? It might mean rates below the Wicksellian natural rate, which is the rate that produces stable inflation — but with inflation consistently below the Fed’s target, this criterion would if anything say that rates are artificially high, propped up by the zero lower bound.
Anyway, this is an issue that has been hashed over many times, most recently by Ben Bernanke, saying pretty much exactly the same thing I said a year earlier. But someone at Bloomberg thinks it’s just a well-known fact that rates are artificially low, and so misinforms readers.