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December 11, 2007
Expectations
The Fed cuts interest rates and the Dow drops almost 300 points. I guess Wall Street really is fueled by that most intangible of intangibles - expectations. To quote Keynes:
Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits - a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. (The General Theory of Employment Interest and Money, pp. 161-162).
Posted by Ken Jarboe at December 11, 2007 4:31 PM
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