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So what market prices really indicate is faith in the future. Everything else, from asset valuations, to cash flow expectations, to special prices paid for shares during takeovers, depends on this faith.

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The remarkable corollary of all this is that to maximise economic growth, governments should act in ways that maximise faith in the future. If they destroy faith in the future, sooner or later the economy will inevitably start to contract - potentially quite violently.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Sep 1st, 2009 at 12:32:17 PM EST
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