This article, while interesting, is like reading a weather forecast that says "there might be a big storm at the end of the week, but there might not". The idea that the population can't keep on growing exponentially and using ever more resources has been around since ancient Greece at least.
I'm sure that if we were able to look at long term economic stats for the last 2 millennia, there would be graphs that looked very similar to those in this article.
Of course, one day the population and our use of resources has to stop growing, but I doubt we'll see it coming 100 years in advance.
>Of course, one day the population and our use of resources has to stop growing, but I doubt we'll see it coming 100 years in advance.
I can't speak to resource usage, but I think you'll find population models have the global population plateauing within the next 50-100 years. We aren't talking about what's going to happen in 2000 years here, that no one can be certain of. Your argument is like saying it's rained and stormed for 2000 years why even try to predict the weather for the rest of the week? I hope you don't mind, but I think I'll still pay attention to the weather forecast even if it isn't always 100% accurate.
Every recession in history has generated this same category of article - every generation feels that their recession is special because "things have changed now!"
Maybe this one is different - that's a possibility. But I wouldn't bet my money on it.
To be fair, the world is constantly changing. I don't know if that means each recession is special so much as unique.
Just looking at the last major recession in the 70s, things did change quite a bit from there. Manufacturing and distribution of goods started to form into the global supply chain we have today, that was certainly a unique development in our world based on changing technologies. It's not that much of a stretch to expect similar unique changes to the global economy today due to changing technology and consumer habits.
It is, and eventually, we will probably run into a real game-changer.. but I'm mostly concerned for all the people that are saving money in index funds. Every recession, the news and the discourse are about how this one is special, and how the causes of this recession run so deep.
People are not good at remembering that we had those same conversations last time and the time before - they get a gut feeling that 'this is the big one', and they pull their money out of the market during the recession and put it back in after everything's ok, essentially tossing a major fraction of their life savings overboard.
What people seem to never consider is that when we actually move out of an expansionist economy, the effects will be much broader than "our stock returns are not so good anymore"; their inability to retire at 65 would be the least of their concerns.
but the casino aspect of the economy has grown stronger and more pervasive over time. Look at a chart of the 10 year US bond. The interest rates have plummeted over the last 30 years. These low rates have intensified the casino aspect of the stock market.
The rates were lowered after the crashes of 2001-2002 and 2008-2009. But the rates cannot be lowered any more. Why? They are at zero, effectively.
The point is that there are always differences - each recession is a snowflake, with distinct causes and circumstances. That doesn't impact the fact that they all behave pretty much the same way at the large scale, and it shouldn't affect your decisions about the market (unless you are an expert, and inordinately good at avoiding various cognitive biases).
There is nothing about growth that is guaranteed. Perhaps thinking that the entire world can adopt western style institutions and would become good consumers was too optimistic.
As always:
it all depends on how meta/abstract approach someone uses. On certain level of abstraction each crisis seems to follow the same mechanism (and any possible differences can be explained on even higher level of abstraction). And when you analyse things on the more detailed level you notice that "this time it's different", but of course "any possible differences (...) higher level of abstraction".
Ans doth approaches seem to be equally valid in their specific contexts and applications.
Our economy has reached a point where it's becoming so harmful to the environment it exploits that it's causing a mass extinction, an event that hasn't occurred for 250 million years. On the timescale of a few decades, things are becoming very, very different.
yup. we're putting CO2 into the atmosphere at a ridiculous and ever-increasing rate. 40 gigatons of CO2 last year -- that's around 5 tons of CO2 / (person * year), assuming a fantasy version of the world where we're all contributing an equal amount of pollution.
it's not just "the economy", it is (people) * (polluting affluent lifestyles). that said, it doesn't help that the people with the bulk of the wealth and political power are the ones that perceive they have the most to lose if the status quo changes.
it also doesn't help that it is very difficult to stay focused on longer-term problems, while society tends to focus on playing the game for short term wins. invest, speculate, profit.
it'll be an interesting few decades. hopefully we realise that ideas that served us well in the past are context-dependent, and the context is changing.
Mass extinctions have occurred with much greater regularity than every 250 million years. The ice ages come in pulses, to use the geological term, and both the warming and cooling trends have inflicted vast changes in the species inhabiting the planet.
As far as CO2 emissions, the EPA's own statistics suggest a static-to-downward trend since the early 2000s in the U.S. (http://www.epa.gov/climatechange/ghgemissions/gases/co2.html). We're barely above where we were in 1990, despite an increase in population from 250 million in 1990 to 319 million today. 3rd World economies will eventually follow suit, as they adopt the cheap new green tech that we're getting.
The trend today is toward more efficient vehicles, cheaper and more available solar for houses, a massive switch in electric power plants from coal and oil to inexpensive natural gas which emits less carbon.
Technology, Chinese mass production of green energy products like solar panels, American fracking of natural gas, all will conspire to reduce the carbon emissions. The trends are heartening.
I think we are reaching a stasis point in the global economy. Aging populations across Europe, Japan and the US are driving demand lower. Developing economies could pick up the slack, and China has been trying to get their population to save less and spend more, but the results haven't been that great so far.
Last I saw it was about an even when expressed as a percentage of GDP (around 44%).
I don't think the that really invalidates my main point. The Chinese have a massive industrial over-capacity that will have to be either liquidated or supported via the PBoC.
The issue is that the immigrants are also having less children, and the countries where they're from are also drastically reducing their birth rates.
Honestly, as an environmentalist it's not a bad thing at all, since the peak in resource consumtion will come about either because of a voluntary population reduction, or catastrophic mismanagement of growth.
However, we probably have never had a similar situation in human history, and I don't know how our economies will adapt.
What are seeing isn't a shift to the service economy but a shift to the automation and digitalization economy. In other words and to paraphrase – It's the technology stupid!
Look at any sector and you will see that the only way to further improve production-output is to add more technology or artificial enhancements, which means slowly; less and less; jobs for everyone.
Now if the price on all products and services went down at the same time as the number of jobs are disappearing and the wages goes down, we wouldn't have any issues.
But the problem is that urbanization pushes prices up and so even though production gets cheaper and cheaper, the cost of living still seems to be going up which means we will need to digitalize even more to make up for it. But that takes time and in the meantime millions and millions of people in the west are loosing any ability to participate in the job-market because they aren't just competing against each other or outsourcing but everyone is competing against automation and digitalization.
This global slowdown is different because the shift to the service economy in China means that production have no other way to go than automation which means you won't have the benefits of humans getting jobs and therefore become part of the global economy.
Instead wealth goes to those who own the robots and Marx although wrong in most things, was finally right about something :)
I agree with you, I think the deflationary effects of technology are vastly underestimated. Have a look around at what technology is doing day-to-day to consumption and costs and it should be obvious, and yet talking heads still expect CPI inflation.
We just got a nice patch because of China's malinvestment stimulus but now they are forced to rebalance regardless of Xi. The commodity supercycle is over and that's bad news for many countries (not really the US).
What happened was that globalization moved the jobs somewhere else, it didn't create more in the west. In fact each decade less and less jobs have been created. The fact is that there is no new industry for people to flee into and if people think there is they have to explain what that would be.
Marx was right if you interpret him as only concerned with unskilled, menial laborers.
And yeah, non-service-sector unskilled labor is going the way of the dodo. I'm having a difficult time mourning this, as it frees up an awe-inspiring amount of human potential.
Very interesting that you bring up Marx! However if I recall correctly Marx was mostly worried about the complete commoditization of work (which we see to some extent with service companies like Uber). I don't think he considered the possibility that there simply might not be any work for anyone. It'd be interesting to hear his views on these contemporary developments: Because the co-ownership of a factory by it's employees (which communism envisions) is a mentally reasonable concept that a lot of people love. However how would you go about a company that only requires three people to service millions of customers? Does communism have an answer to that? Would Marx suggest to just turn every company into a state owned company? Could the free software movement by Richard Stallman be a clandestine communist movement to socialize the ownership of the modern means of production (ie. software)?
Because theoretical communism has no use for money, the notion of ownership of that factory also goes away. The theory (at least the way I understand it) is that in a communist utopia, the society is not constrained as much by consumption and therefore everyone has enough.
Ironically, we might be approaching that point from the basic needs level - food and shelter for everyone is not such an outlandish idea anymore. However, I do not believe that people will be magically able to distribute that shared wealth evenly, so the more dystopian future is more likely where for the majority of manufacturing-related needs, capital completely replaces rank and file labor.
Personally, I think the idea of basic income or some other redistribution of wealth that keeps the demand alive is a more reasonable solution to the shrinking labor pool, as the need for labor will not evaporate completely, but instead individuals will be displaced from the labor pool in ways that will prevent them from effectively competing again.
Short answer: no, but it is extremely unpredictable (hence the billions of people between the low and high forecasts). You can look at countries as incomes increase, infant mortality decreases etc, and see patterns in fertility. And fertility rates do sometimes increase or decrease for poorly understood reasons, but they're not random: https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&....
They are guessing much less than those who simply extrapolate exponential growth.
The population plateau is based on the development trends observed in developed and developing countries. As standard of living increases, with improved life expectancy and education, population growth slows.
Many developed countries are below the replacement rate, and any population growth is as a result of immigration from less-developed countries.
When you live in a society dominated by agriculture children are an asset. When you live in an industrial/service based society like our own children are a cost. So generally speaking, most people have fewer children. As the world develops the trend continues. China is probably a data anomaly because of it's one child policy... however if it had not had it, i'd be willing to bet you could watch the trend.
I'll just throw this out there, I pay $1600 a month for daycare. It's the reason I have 1 kid, and waiting before having a second. Throw into the mix better birth control tech/education/use, and this kind of restraint is possible.
Banking master plan
Step 1. Go global. Check.
Step 2. Sell all the debt you can. Check.
Now what?
One thing to consider is that the baby boomer generations are all hitting 60. This large population group is entering the period in their lives when they stop buying stuff.
There's only one planet, and once the banks have everyone in debt where's their business model?
The reason interest rates are effectively zero is because if they raise them the entire world will declare bankruptcy. The banking system is screwed. Time for a reset.
It's too bad the millennial generation isn't larger than the baby boomers, and doesn't have houses and childcare things to buy. The economy might have had a chance to keep on being an economy.
>Step 1. Go global. Check. Step 2. Sell all the debt you can. Check. Now what?
You tell me. It sounds like you believe all of that "sold debt" is just vaporized and results in nothing, instead of centuries of insane global growth. Don't believe it? Look out your window.
There is no "now what". That's the problem. There's only so much "good debt" to buy and it's all bought. These systems depend on continuous growth to function, and unless you can figure out how to sell mortgages to Martians, you are fresh out of growth. Maybe I'm wrong, and maybe they'll figure out how to have another bull run, but I think they've hit the wall.
Central banks [Federal Reserve/European Central Bank/Bank of Japan/People's Bank of China/Swiss National Bank] are responsible for global capital misallocation.
Due to immense and unrelenting political pressure, central banks the world over have mispriced capital at gargantuan scales. This has led to immense distortions in capital markets.
The level of central bank intervention has only grown in the past 30 years. So the resulting economic growth or slowdown is measurably different than before.
Anecdotally, look at the following to see one example of capital distortion in action:
The Swiss National Bank digitally printed an enormous amount of Swiss Francs and bought Euros in order to peg their currency lower (didn't work). They used this excess of digitally printed capital to buy real capital assets such as global equities.
A question to ponder: what is the fair market price of global equities when some buyers can print money? Does it matter?
http://www.bloomberg.com/news/articles/2015-05-06/snb-boosts...
"The SNB stands out among major central banks for its equity investments. It had 522 billion francs ($572 billion) of foreign exchange reserves at the end of March, acquired due to interventions to defend the currency cap of 1.20 per euro it had in place from 2011 to early 2015."
> what is the fair market price of global equities when some buyers can print money?
You raise a good point. "Fair" has long gone out the window when one or more participants has a standing army. Which of course ties in to which participants can print money.
Certain powers having "standing armies" is a quaint way to describe it. The US is on a permanent war footing in the Global War on Terror and surveils its allies as assiduously as they would a hostile party in a hot war.
Not even a small crack in the neoliberal hegemony is allowed. Not even internal doubt. Repatriate your gold? How amusing. We're all in this together. Or else.
A question to ponder: what is the fair market price of global equities when some buyers can print money? Does it matter?
Well, I don't know about "fair" but the phenomena you describe has the upshot that equities wind up being worth more money as money itself become less valuable.
The situation you describe is a massive inflation in the sense of massively inflating a currency. The main is that by hook and crook, a wage-price inflation has been avoid - first world workers have just sucked-up some of the cost inflation and other parts of the first world cost of living have been kept under control by cheaper good from China and elsewhere.
Similarly, other visible manifestations of inflation have been controlled: the price of gold has controlled by simply mining more gold - contrary to gold bugs, there is still quite available in the ground at a high enough price and the world is in little danger of gold being taken as real money again. And you described the inflating of the Swiss franc with other "safe" currencies undoubtedly following.
It all still hinges on the average first world workers being willing to work for continually inflating dollars. The process is abetted by cost-of-living measures based on fairy tales - the ability to ignore continually increasing rents around the country is notable here.
So a way to look at all this:
"Stocks aren't going up, everything else is going down"
>They used this excess of digitally printed capital to buy real capital assets such as global equities.
Equities aren't real capital, in the economic sense, either. Real capital is land, plants and equipment; equities are financial capital.
>"the Swiss National Bank digitally printed an enormous amount of Swiss Francs and bought Euros in order to peg their currency lower (didn't work)
What do you mean it didn't work? They maintained the peg for years. One of the reasons they unpegged the currency was that the Euro was depreciating, thus maintaining the peg was causing the SNB to depreciate against other currencies, like the USD.
>what is the fair market price of global equities when some buyers can print money? Does it matter?
There's no mystery. Fair market price is the agreed upon price in a transaction. If you think that for some reason all prices are distorted due to central bank printing, then account for that distortion in determining what price you're willing to accept or bid.
Equities represent shares in real assets: factories, patents, etc. A pedantic discussion of where accountants draw the line on the definition of capital does not change the point: central banks have printed trillions and participate in capital markets.
The SNB experienced a massive capital loss when abandoned their peg from 2011 in early 2015. They entered and exited their positions due to politics and global capital distortions.
It is a tautology to suggest that a market price is by definition fair - after all it was agreed by both buyer and seller. But markets themselves can be unfair - in the most basic sense, by the participation of shills.
And in our current economic environment: the concept of too big to fail. Politically, we've accepted an asymmetric reward structure for some market participants. This results in market distortion and unfairness to others.
>The SNB experienced a massive capital loss when abandoned their peg from 2011 in early 2015
First of all, I wouldn't call a 10% loss "massive". The market generally suffers one of those events annually. Second, it was short lived. The USD/CHF went from 1.01 to 0.86 after it was unpegged. It now sits at 0.97, 8 months later (1.2, 0.98, 1.08 for the EUR/CHF, respectively). It was a non-event.
I mean, I'm still trying to figure out what point you're making. Are capital market distortions new? Sure, the scale of intervention might be larger. But the scale of everything is larger today. And why do you assume that these distortions are always bad? I don't. They have to be examined on their individual merits. I like the government building roads and subsidizing certain industries. Sometimes it's good business. Maybe buying stock in certain domestic industries is as well.
Are shills new?
Is an asymetric reward structure new?
The basis of the argument against TBTF is moral hazard. Is that unique to the banking system? I've seen it suggested on these very boards to incorporate your company ASAP, in order to prevent personal financial liability. Well, that just might promote higher risk-taking by the entrepreneur. Or what about the house-flippers? Heads I cash in, tails I mail the keys to the bank. Are these people too small to fail?
This is our system. I choose to study it as it is rather than compare it to some non-existent ideal.
57 comments
[ 5.1 ms ] story [ 129 ms ] threadI'm sure that if we were able to look at long term economic stats for the last 2 millennia, there would be graphs that looked very similar to those in this article.
Of course, one day the population and our use of resources has to stop growing, but I doubt we'll see it coming 100 years in advance.
I can't speak to resource usage, but I think you'll find population models have the global population plateauing within the next 50-100 years. We aren't talking about what's going to happen in 2000 years here, that no one can be certain of. Your argument is like saying it's rained and stormed for 2000 years why even try to predict the weather for the rest of the week? I hope you don't mind, but I think I'll still pay attention to the weather forecast even if it isn't always 100% accurate.
Maybe this one is different - that's a possibility. But I wouldn't bet my money on it.
Just looking at the last major recession in the 70s, things did change quite a bit from there. Manufacturing and distribution of goods started to form into the global supply chain we have today, that was certainly a unique development in our world based on changing technologies. It's not that much of a stretch to expect similar unique changes to the global economy today due to changing technology and consumer habits.
People are not good at remembering that we had those same conversations last time and the time before - they get a gut feeling that 'this is the big one', and they pull their money out of the market during the recession and put it back in after everything's ok, essentially tossing a major fraction of their life savings overboard.
What people seem to never consider is that when we actually move out of an expansionist economy, the effects will be much broader than "our stock returns are not so good anymore"; their inability to retire at 65 would be the least of their concerns.
The rates were lowered after the crashes of 2001-2002 and 2008-2009. But the rates cannot be lowered any more. Why? They are at zero, effectively.
That is different.
Gloom and Doom sells papers, and it always has.
They could always go negative:
So, are you making the claim that the stock market is less stable today than it was 100 years ago?
Ans doth approaches seem to be equally valid in their specific contexts and applications.
it's not just "the economy", it is (people) * (polluting affluent lifestyles). that said, it doesn't help that the people with the bulk of the wealth and political power are the ones that perceive they have the most to lose if the status quo changes.
it also doesn't help that it is very difficult to stay focused on longer-term problems, while society tends to focus on playing the game for short term wins. invest, speculate, profit.
it'll be an interesting few decades. hopefully we realise that ideas that served us well in the past are context-dependent, and the context is changing.
As far as CO2 emissions, the EPA's own statistics suggest a static-to-downward trend since the early 2000s in the U.S. (http://www.epa.gov/climatechange/ghgemissions/gases/co2.html). We're barely above where we were in 1990, despite an increase in population from 250 million in 1990 to 319 million today. 3rd World economies will eventually follow suit, as they adopt the cheap new green tech that we're getting.
The trend today is toward more efficient vehicles, cheaper and more available solar for houses, a massive switch in electric power plants from coal and oil to inexpensive natural gas which emits less carbon.
Technology, Chinese mass production of green energy products like solar panels, American fracking of natural gas, all will conspire to reduce the carbon emissions. The trends are heartening.
Wait, there were some huge bird-like animals here 60 million years ago.
http://www.cnbc.com/2015/05/07/more-pain-ahead-for-china-ste...
I think we are reaching a stasis point in the global economy. Aging populations across Europe, Japan and the US are driving demand lower. Developing economies could pick up the slack, and China has been trying to get their population to save less and spend more, but the results haven't been that great so far.
I don't think the that really invalidates my main point. The Chinese have a massive industrial over-capacity that will have to be either liquidated or supported via the PBoC.
Interestingly while Europe has this problem as well, the US does not thanks in a large part due to immigration.
Honestly, as an environmentalist it's not a bad thing at all, since the peak in resource consumtion will come about either because of a voluntary population reduction, or catastrophic mismanagement of growth.
However, we probably have never had a similar situation in human history, and I don't know how our economies will adapt.
Look at any sector and you will see that the only way to further improve production-output is to add more technology or artificial enhancements, which means slowly; less and less; jobs for everyone.
Now if the price on all products and services went down at the same time as the number of jobs are disappearing and the wages goes down, we wouldn't have any issues.
But the problem is that urbanization pushes prices up and so even though production gets cheaper and cheaper, the cost of living still seems to be going up which means we will need to digitalize even more to make up for it. But that takes time and in the meantime millions and millions of people in the west are loosing any ability to participate in the job-market because they aren't just competing against each other or outsourcing but everyone is competing against automation and digitalization.
This global slowdown is different because the shift to the service economy in China means that production have no other way to go than automation which means you won't have the benefits of humans getting jobs and therefore become part of the global economy.
Instead wealth goes to those who own the robots and Marx although wrong in most things, was finally right about something :)
We just got a nice patch because of China's malinvestment stimulus but now they are forced to rebalance regardless of Xi. The commodity supercycle is over and that's bad news for many countries (not really the US).
What happened was that globalization moved the jobs somewhere else, it didn't create more in the west. In fact each decade less and less jobs have been created. The fact is that there is no new industry for people to flee into and if people think there is they have to explain what that would be.
https://plot.ly/~BethS/8/job-growth-by-decade-in-the-united-...
As long as economist keep talking about technology as an externality, they have no business talking about where the economy is headed. IMO.
Bluntly, Australia and Canada are screwed.
And yeah, non-service-sector unskilled labor is going the way of the dodo. I'm having a difficult time mourning this, as it frees up an awe-inspiring amount of human potential.
Ironically, we might be approaching that point from the basic needs level - food and shelter for everyone is not such an outlandish idea anymore. However, I do not believe that people will be magically able to distribute that shared wealth evenly, so the more dystopian future is more likely where for the majority of manufacturing-related needs, capital completely replaces rank and file labor.
Personally, I think the idea of basic income or some other redistribution of wealth that keeps the demand alive is a more reasonable solution to the shrinking labor pool, as the need for labor will not evaporate completely, but instead individuals will be displaced from the labor pool in ways that will prevent them from effectively competing again.
The population plateau is based on the development trends observed in developed and developing countries. As standard of living increases, with improved life expectancy and education, population growth slows.
Many developed countries are below the replacement rate, and any population growth is as a result of immigration from less-developed countries.
http://www.ted.com/talks/hans_rosling_shows_the_best_stats_y...
I'll just throw this out there, I pay $1600 a month for daycare. It's the reason I have 1 kid, and waiting before having a second. Throw into the mix better birth control tech/education/use, and this kind of restraint is possible.
The rhetoric of 'WE NEED MORE DEMAND' has hurt many countries and is probably one of the causes of this slowdown.
You tell me. It sounds like you believe all of that "sold debt" is just vaporized and results in nothing, instead of centuries of insane global growth. Don't believe it? Look out your window.
Ill bet anything that you're wrong, though.
Due to immense and unrelenting political pressure, central banks the world over have mispriced capital at gargantuan scales. This has led to immense distortions in capital markets.
The level of central bank intervention has only grown in the past 30 years. So the resulting economic growth or slowdown is measurably different than before.
Anecdotally, look at the following to see one example of capital distortion in action:
The Swiss National Bank digitally printed an enormous amount of Swiss Francs and bought Euros in order to peg their currency lower (didn't work). They used this excess of digitally printed capital to buy real capital assets such as global equities.
A question to ponder: what is the fair market price of global equities when some buyers can print money? Does it matter?
http://www.bloomberg.com/news/articles/2015-05-06/snb-boosts... "The SNB stands out among major central banks for its equity investments. It had 522 billion francs ($572 billion) of foreign exchange reserves at the end of March, acquired due to interventions to defend the currency cap of 1.20 per euro it had in place from 2011 to early 2015."
Swiss National Bank's Portfolio 6/30/2015: http://www.nasdaq.com/quotes/institutional-portfolio/swiss-n...
You raise a good point. "Fair" has long gone out the window when one or more participants has a standing army. Which of course ties in to which participants can print money.
Not even a small crack in the neoliberal hegemony is allowed. Not even internal doubt. Repatriate your gold? How amusing. We're all in this together. Or else.
Well, I don't know about "fair" but the phenomena you describe has the upshot that equities wind up being worth more money as money itself become less valuable.
The situation you describe is a massive inflation in the sense of massively inflating a currency. The main is that by hook and crook, a wage-price inflation has been avoid - first world workers have just sucked-up some of the cost inflation and other parts of the first world cost of living have been kept under control by cheaper good from China and elsewhere.
Similarly, other visible manifestations of inflation have been controlled: the price of gold has controlled by simply mining more gold - contrary to gold bugs, there is still quite available in the ground at a high enough price and the world is in little danger of gold being taken as real money again. And you described the inflating of the Swiss franc with other "safe" currencies undoubtedly following.
It all still hinges on the average first world workers being willing to work for continually inflating dollars. The process is abetted by cost-of-living measures based on fairy tales - the ability to ignore continually increasing rents around the country is notable here.
So a way to look at all this:
"Stocks aren't going up, everything else is going down"
Equities aren't real capital, in the economic sense, either. Real capital is land, plants and equipment; equities are financial capital.
>"the Swiss National Bank digitally printed an enormous amount of Swiss Francs and bought Euros in order to peg their currency lower (didn't work)
What do you mean it didn't work? They maintained the peg for years. One of the reasons they unpegged the currency was that the Euro was depreciating, thus maintaining the peg was causing the SNB to depreciate against other currencies, like the USD.
>what is the fair market price of global equities when some buyers can print money? Does it matter?
There's no mystery. Fair market price is the agreed upon price in a transaction. If you think that for some reason all prices are distorted due to central bank printing, then account for that distortion in determining what price you're willing to accept or bid.
The SNB experienced a massive capital loss when abandoned their peg from 2011 in early 2015. They entered and exited their positions due to politics and global capital distortions.
http://www.bloomberg.com/news/articles/2015-07-31/snb-posts-...
http://www.economist.com/blogs/economist-explains/2015/01/ec...
It is a tautology to suggest that a market price is by definition fair - after all it was agreed by both buyer and seller. But markets themselves can be unfair - in the most basic sense, by the participation of shills.
https://en.wikipedia.org/wiki/Shill
And in our current economic environment: the concept of too big to fail. Politically, we've accepted an asymmetric reward structure for some market participants. This results in market distortion and unfairness to others.
https://en.wikipedia.org/wiki/Too_big_to_fail
First of all, I wouldn't call a 10% loss "massive". The market generally suffers one of those events annually. Second, it was short lived. The USD/CHF went from 1.01 to 0.86 after it was unpegged. It now sits at 0.97, 8 months later (1.2, 0.98, 1.08 for the EUR/CHF, respectively). It was a non-event.
I mean, I'm still trying to figure out what point you're making. Are capital market distortions new? Sure, the scale of intervention might be larger. But the scale of everything is larger today. And why do you assume that these distortions are always bad? I don't. They have to be examined on their individual merits. I like the government building roads and subsidizing certain industries. Sometimes it's good business. Maybe buying stock in certain domestic industries is as well.
Are shills new?
Is an asymetric reward structure new?
The basis of the argument against TBTF is moral hazard. Is that unique to the banking system? I've seen it suggested on these very boards to incorporate your company ASAP, in order to prevent personal financial liability. Well, that just might promote higher risk-taking by the entrepreneur. Or what about the house-flippers? Heads I cash in, tails I mail the keys to the bank. Are these people too small to fail?
This is our system. I choose to study it as it is rather than compare it to some non-existent ideal.