The (Nature of) Shock Doctrine / Paul Krugman

[sasha031]

Just a thought on market movements: you often see news stories confidently asserting that factor X was responsible for any given market movement. Serious observers rightly make fun of such stories; after all, how do they know? And it goes beyond funny to downright harmful when the stories assert supposed facts that actually serve some policy agenda. Lately we’ve seen that with regard to interest rates: again and again, upticks in US interest rates are asserted to be the result of debt fears, as evidence that the bond vigilantes have arrived.


But how can you place an interpretation on market movements? What’s the nature of the shock? One way to answer this question would be to ask the traders — although my sense is that really good traders have intuitions that generally go beyond their ability to articulate reasons. Another approach, however, is to look at more than one asset price; if you have a story about what’s driving one price, that story should make sense for the other, too.

http://krugman.blogs.nytimes.com/2011/03/23/the-nature-of-shock-doctrine/?smid=tw-NytimesKrugman&seid=auto