OBS factor

On August 18, stock indices again collapsed around the world: by 2-4% in the US, by 4-5% in Europe, by 5-6% in Russia. What happened the day before? Has Greece defaulted? Has the largest investment bank gone bankrupt? Has oil production fallen in the world? Nothing of the kind: two members of the US Federal Reserve expressed doubt about the correctness of the decision of their boss, Ben Bernanke, to keep key interest rates low. And that's it! That is, no one canceled the decision on rates, but a couple of statements from not the very first persons were enough for the markets of the whole world to roll down.

The same thing happened on August 5: the collapse in all markets was provoked by the downgrading of the US credit rating by Standard & Poor's. This is just a theater of the absurd: a timid downgrade of a single rating by a single agency that does not have a monopoly on the truth at all - and away we go: stock indices around the world are updating lows, commodity prices are falling, exchange rates are jumping ...

Any talk about the global interconnections of the financial world is not an explanation. The absurdity is that the shares of thousands of enterprises in Hong Kong, Moscow, Sydney, Frankfurt, Tokyo collapsed not because their sales and profits fell, not because management unsuccessfully bought some assets, but simply because in American rating triad "AAA" the last "A" was replaced by a "plus sign".

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You still have to change the economic model, it’s only a pity that most likely through a new crisis

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Your author recently had a meeting with a group of young people who wanted to start their own business by playing the stock market. They were worried about one question: how to determine the events that set the direction of movement of stock indices? Even then I thought: what a huge number of people around the world are doing exactly the same thing: they are trying to calculate the moment when it is possible to profitably buy or sell some asset - stocks, commodities, real estate, food. As a result, an economy is being created that can safely be called speculative. Profitable resale, not production, becomes the main driving force in such an economy.

How can one not recall the words of John Keynes that “speculation does no harm if it remains bubbles on the surface of a smooth flow of entrepreneurship. However, the situation becomes serious when entrepreneurship turns into a bubble in the maelstrom of speculation.

Speculative economics is based not on facts, but on expectations. Its participants are trying not so much to analyze events as to predict them in order to start selling or buying with maximum profit. At the same time, fundamental factors mean much less virtual ones for them. There is no need to look far for examples: the agreement to raise the US debt ceiling (a fundamental factor) did not impress investors as much as the virtual change in the S&P rating.

The modern economy is most dependent on the OBS factor (“one grandmother said” - forgive me soviet jargon), and it doesn’t matter that the rating agency or respected members of the Fed act as the “grandmother”. At the same time, I do not blame Standard & Poor's for anything, I do not suggest arresting its leaders (as some public figures in the US called for) or conducting searches in its offices (as they did in Italy). The agency puts up its own ratings - well, let it be, this is its function, from the performance of which enterprises should not go bankrupt and stand on the brink of default of the country.

An economy that depends on the MBS factor is doomed to be unstable. The current situation on the stock exchanges should be a warning to world leaders: it is time to correct something in the financial “conservatory” in order to reduce the degree of speculation. It seems that the heads of state understand this and have been promising some kind of global innovations for several years, but things are still there. Nevertheless, the economic model will still have to be changed, the only pity is that most likely through a new crisis.