Originally Posted by
SailorRob
Yes a good explanation regarding the function of capital markets.
However I think it's roughly the opposite of the effect you believe in. The massive bull market we have just been through has lead to the least efficient raising of capital not the other way around. As you mentioned productive growth, the high availability of capital and ease of raising (low hurdles) has just turned resources into exercise bikes with ipads on their handle bars and all kinds of ridiculous non productive folly, I could go into enormous detail of the squander of resources due to this fact.
It's when capital is scarce and hard to come by that it is very efficiently allocated and the people raising it make damn sure it will be market driven and productive - the very reason behind the argument of normalising rates.
The counter argument is that when capital is sprayed around like confetti, 90% is wasted but someone will come up with a daft idea that another idiot funds and it actually creates a breakthrough, i.e. if you throw enough, something will stick.
Warren Buffett and Chris Bloomstran would disagree with the notion of bear markets disturbing the allocation of capital to any degree that was a negative for society.
While I would like a market where prices fell 90% and didn't recover, this is not what I'm suggesting as it's unrealistic. I'm suggesting a period of 10 plus years where prices don't reach all time highs and remain below historical averages.
Some of you will recall that to create an average, you need to have some time below it.
As Azz has pointed out, it's in nobody's interest to create a scenario where less goods and services are produced, Azz confuses this with high and low prices which are totally different things.
When the market was priced at the same level in 2012 as in the year 2000... Nobody starved.