RE: Volatility and the market

["Colander, David" <colander@xxxxxxxxxxxxxxxxxxxxx>]

In regard to Paul's comments:

> Trond and David's concerns has to do with volatility in financial markets.
> Trond's bond would not necessarily solve the problem.  There have been
> periods when price fluctuations in bond markets clearly were much larger
> than in equity markets-- e.g., during the early Volker years.
>
 My concern is not directly volatility, it is distributional--making the
market more efficient in the sense of having rises in the price of a stock
lead to increased investment and not rent for lucky individuals who own the
asset.   So I don't see why the fact that exchange rates permit wider
fluctuations  in stock prices matters.


> The question is how to stabilize the movement of financial assets whether
> they be stocks, bonds, foreign exchange, etc.  (What Trond and David
> forget
> is that in an open economy even if you restrict the domestic price of
> securities to plus or minus 20 %, the exchange rate permits wider
> fluctations in the value of these stocks in terms of another currency.)
>
	While there are some similarities, I don't see the issues and
different.  There have been many debates about target exchange rate zones,
but my interest is in the stock market and its workings.