A summary of this section of the blog.
Category: Productivity
A forensic examination of a stylised company’s balance sheet, to show that business saving should, in fact, be the true source of investment.
How the efficient market hypothesis justified deregulation of financial markets, leading the to the extreme chaos, inefficiency and instability we see in these markets today.
Why the Efficient Market Hypothesis is wrong, and therefore why markets always price financial assets incorrectly.
An explanation of the “Efficient Market Hypothesis” – the belief that markets will always price financial assets correctly.
What is the “fundamental value” of a financial asset?
How everything in the blog so far explains the fall in productivity in recent years.
Failing to channel saving to investment will lead to the paradox of thrift, slowing growth in productivity, while simultaneously causing asset price bubbles.
An explanation of what the saving-investment identity actually tells us about how the economy functions (everything in the blog so far has been leading up to this point).
A logical proof that the explanation in textbooks of why the saving-investment holds must be wrong, so that you can fully understand the implications of this identity, explored in the rest of this section.