Reasonable volatility

Chris Dillow

Chris Dillow

There have been two main reactions to last month's fall in stocks markets. On the one hand, there are those such as Olivier Blanchard of the Peterson Institute who believe the falls are unjustified by the state of the economy and are instead due to investors' herding. And on the other, there are those such as George Soros who believe we really are in for a repeat of 2008. There is, however, a third view. This is that the falls are a rational response to the low but changing probability of a disaster.

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