乔治索罗斯关于金融市场和泡沫演讲全文

2009年10月，乔治索罗斯在位于匈牙利布达佩斯的中欧大学发表了共分五个部 分的系列演讲。本文是他关于金融市场和泡沫的演讲的全文。Financial MarketsPublished: October 27 2009 22:26 | Last updated: October 27 2009 22:26Financial markets provide an excellent laboratory for demonstrating and testing the ideas that I put forward in an abstract form yesterday. The course of events is easier to observe than in most other places. Many of the facts take a quantitative form, and the data are well recorded and well preserved. The opportunity for testing occurs because my interpretation of financial markets directly contradicts the efficient market hypothesis, which has been the prevailing theory about financial markets. That theory claims that markets tend towards equilibrium; deviations occur in a random fashion and can be attributed to extraneous shocks. If that theory is valid, mine is fals eand vice versa.I am not in a good position to criticize the prevailing paradigm directly. I went into the financial markets in order to make money, and to do that I did not need to know either modern portfolio theory or the theory of rational expectations. I developed my own interpretation of financial markets and put it forward as a clear alternative to the prevailing view. When I published The Alchemy of Finance in 1987 I frankly admitted my ignorance of the generally accepted theories. No wonder that the economics profession reciprocated by ignoring my interpretation. The Governor of the Bank of England, Mervyn King, did me the honor of explicitly dismissing my theory, but most other economists simply ignored it.All this has changed in the wake of the recent financial crisis. Events have conclusively demonstrated the inadequacy of the efficient market hypothesis. It neither predicted nor explained what happened. At the same time, my writings provided a conceptual framework in terms of which events could be better understood.They began to be taken seriously, both by otherSike Mervyn King -and by myself. I began to think that my interpretation does provide a new and better paradigm, and I put it forward as such in a book I published early in 2008, well before the bankruptcy of Lehman Brothers.And yet the theory of reflexivity is still not accepted in academic circles. The failure of the efficient market hypothesis is generally admitted, but insofar as a new paradigm is emerging, it is based on behavioral economics. Behavioral economics is compatible with reflexivity but, as I will try to show, it explores only one half of the phenomenon.* * *Let me state the two cardinal principles of my conceptual framework as it applies to the financial markets. First, market prices always distort the underlying fundamentals. The degree of distortion may range from the negligible to the significant. This is in direct contradiction to the efficient market hypothesis, which maintains that market prices accurately reflect all the available information.Second, instead of playing a purely passive role in reflecting an underlying reality, financial markets also have an active role: they can affect the so-called fundamentals they are supposed to reflect. That is the point that behavioral economics is missing. It focuses only on one half of a reflexive process: the mispricing of financial assets; it does not concern itself with the impact of the mispricing on the so-called fundamentals.There are various feedback mechanisms at work which may validate the mispricing of financial assets, at least for a while. This may give the impression that markets are often right, but the mechanism at work is very different from the one proposed by the prevailing paradigm. I claim that financial markets have ways of altering thefundamentals and that may bring about a closer correspondence between market prices and the underlying fundamentals. Contrast that with the efficient market hypothesis, which claims that markets always accurately reflect reality and automatically tend towards equilibrium. There are various pathways by which the mispricing of financial assets can affect the so-called fundamentals. The most widely travelled are those which involve the use of leverage both debt and equity leveraging. These pathways deserve a lot more research.My two propositions focus attention on the reflexive feedback loops that characterize financial markets. There are two kinds of feedback: negative and positive. Negative feedback is self-correcting; positive feedback is self-reinforcing. Thus, negative feedback sets up a tendency toward equilibrium, while positive feedback produces dynamic disequilibrium. Positive feedback loops are more interesting because they can cause big moves, both in market prices and in the underlying fundamentals. A positive feedback process that runs its full course is initially self reinforcing, but eventually it is liable to reach a climax or reversal point, after which it becomes self reinforcing in the opposite direction. But positive feedback processes do not necessarily run their full course; they may be aborted at any time by negative feedback.* * *I have developed a theory about boom-bust processes, or bubbles, along these lines. Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend. A boom-bust process is set in motion when a trend and a misconception positively reinforce each other. The process is liable to be tested by negative feedback along the way. If the trend is strong enough to survive the test, both the trend and the misconception will be further reinforced. Eventually, market expectations become so far removed from reality that people are forced to recognize that a misconception is involved. A twilight period ensues during whichdoubts grow, and more people loose faith, but the prevailing trend is sustained by inertia. As Chuck Prince, former head of Citigroup said: we must continue dancing until the music stops. Eventually a point is reached when the trend is reversed; it then becomes self reinforcing in the opposite direction. C h a r t To go back to my original example, the conglomerate boom of the late 1960s: the underlying trend is represented by earnings per share, the expectations relating to that trend by stock prices. Conglomerates improved their earnings per share by acquiring other companies. Inflated expectations allowed them to improve their earnings performance, but eventually reality could not keep up with expectations. After a twilight period the price trend was reversed. All the problems that had been swept under the carpet surfaced, and earnings collapsed. As the president of one of the conglomerates, Ogden Corporation, told me at the time: I have no audience to play to.Typically, bubbles have an asymmetric shape. The boom is long and drawn out: slow to start, it accelerates gradually until it flattens out during the twilight period. The bust is short and steep because it is reinforced by the forced liquidation of unsound positions. Disillusionment turns into panic, reaching its climax in a financial crisis.Bubbles that conform to this pattern go through distinct stages: inception; a period of acceleration, interrupted and reinforced by successful tests; a twilight period; and the reversal point or climax, followed by acceleration on the downside culminating in a financial crisis. The length and strength of each stage is unpredictable, but there is an internal logic to the sequence of stages. So the sequence is predicta blebut even that can be terminated by government intervention or some other form of negative feedback.The simplest case is a real estate boom. The trend that precipitates it is that credit becomes cheaper and more easily available; the misconception that turns the trend into a bubble is that the value of the collateral is independent of the availability of credit. As a matter of fact, the relationship between the availability of credit and the value of the collateral is reflexive. When credit becomes cheaper and more easily available, activity picks up and real estate values rise. There are fewer defaults, credit performance improves, and lending standards are relaxed. So at the height of the boom, the amount of credit involved is at its maximum and a reversal precipitates forced liquidation, depressing real estate values.Yet, the misconception continues to recur in various guises. The international banking crisis of 1982 revolved around sovereign debt where no collateral is involved. The creditworthiness of the sovereign borrowers was measured by various debt ratios, like debt to GDP or debt service to exports. These ratios were considered objective criteria, while in fact they were reflexive. When the recycling of petrodollars in the 1970s increased the flow of credit to countries like Brazil, their debt ratios improved, encouraging further inflows and starting a bubble.* * *Not all bubbles involve the extension of credit; some are based on equity leveraging. The best example is, of course, the Internet bubble of the late 1990s. When Alan Greenspan spoke about irrational exuberance in 1996 he misrepresented bubbles. When I see a bubble forming I rush in to buy, adding fuel to the fire. That is not irrational. And that is why we need regulators to counteract the market when a bubble is threatening to grow too big, because we cannot rely on market participants, however well informed and rational they are.Bubbles are not the only form in which reflexivity manifests itself. They are only the most dramatic and the most directly opposed to the efficient market hypothesis; therefore they deserve special attention. But reflexivity can take many other forms. In currency markets, for instance, the upside and downside are symmetrical so that there is no sign of an asymmetry between boom and bust. But there is no sign of equilibrium either. Freely floating exchange rates tend to move in large, multi-year waves.The most important and most interesting reflexive interaction takes place between the financial authorities and financial markets. Because markets do not tend toward equilibrium they are prone to produce periodic crises. Financial crises lead to regulatory reforms. That is how central banking and the regulation of financial markets have evolved. Both the financial authorities and market participants act on the basis of imperfect understanding, and that makes the interaction between them reflexive.While bubbles only occur intermittently, the interplay between authorities and markets is an ongoing process. Misunderstandings by either side usually stay within reasonable bounds because market reactions provide useful feedback to the authorities, allowing them to correct their mistakes. But occasionally the mistakes prove to be self-validating, setting in motion vicious or virtuous circles. Such feedback loops resemble bubbles in the sense that they are initially self reinforcing, but eventually self defeating.* * *It is important to realize that not all price distortions are due to reflexivity. Market participants cannot possibly base their decisions on knowledgethey have toanticipate the future, and the future is contingent on decisions that people have not yet made. What those decisions are going to be and what effect they will have cannot be accurately anticipated. Nevertheless, people are forced to make decisions. To guess correctly, people would have to know the decisions of all of the other participants and their consequences, but that is impossible.Rational expectations theory sought to circumvent this impossibility by postulating that there is a single correct set of expectations and peoplenverge s views will coaround it. That postulate has no basis in reality, but it is the basis of financial economics as it is currently taught in universities. In practice, participants are obliged to make their decisions in conditions of uncertainty. Their decisions are bound to be tentative and biased. That is the generic cause of price distortions.Occasionally, the price distortions set in motion a boom-bust process. More often, they are corrected by negative feedback. In these cases market fluctuations have a random character. I compare them to the waves sloshing around in a swimming pool as opposed to a tidal wave. Obviously, the latter are more significant but the former are more ubiquitous. The two kinds of price distortions intermingle so that in reality boom-bust processes rarely follow the exact course of my model. Bubbles that follow the pattern I described in my model occur only on those rare occasions where they are so powerful that they overshadow all the other processes going on at the same time.* * *It will be useful to distinguish between near equilibrium conditions, which are characterized by random fluctuations, and far-from-equilibrium situations where a bubble predominates. Near equilibrium is characterized by humdrum, everyday events which are repetitive and lend themselves to statistical generalizations.Far-from-equilibrium conditions give rise to unique, historical events where outcomes are generally uncertain but have the capacity to disrupt the statistical generalizations based on everyday events.The rules that can guide decisions in near equilibrium conditions do not apply in far-from-equilibrium situations. The recent financial crisis is a case in point. All the risk management tools and synthetic financial products that were based on the assumption that price deviations from a putative equilibrium occur in a random fashion broke down, and people who relied on mathematical models which had served them well in near-equilibrium conditions got badly hurt.I have gained some new insights into far-from-equilibrium conditions during the recent financial crisis. As a participant I had to act under immense time pressure, and I could not gather all of the information that would have been available and the same applied to the regulatory authorities in charge. That is how far-from-equilibrium situations can spin out of control. This is not confined to financial markets. I experienced it, for instance, during the collapse of the Soviet Union. The fact that the participant s thinking is-btiomuend instead of timeless is left out of the account by rational expectations theory.I was aware of the uncertainty associated with reflexivity, but even I was taken by surprise by the extent of the uncertainty in 2008. It cost me dearly. I got the general direction of the markets right, but I did not allow for the volatility. As a consequence, I took on positions that were too big to withstand the swings caused by volatility, and several times I was forced to reduce my positions at the wrong time in order to limit my risk. I would have done better if I had taken smaller positions and stuck with them. I learned the hard way that the range of uncertainty is also uncertain and at times it can become practically infinite. Uncertainty finds expression_r in volatility. Increased volatility requires a reduction in risk exposure. This leads to what Keynes calls increased liquidity preference. This is an additional factor in the forced liquidation of positions that characterize financial crises. When the crisis abates and the range of uncertainty is reduced, it leads to an almost automatic rebound in the stock market as the liquidity preference stops rising and eventually falls. That is another lesson I have learned recently.I need to point out that the distinction between near and far equilibrium conditions was introduced by me while trying to make some sense out of a confusing reality, and it does not accurately describe reality. Reality is always more complicated than the dichotomies we introduce into it. The recent crisis is comparable to a hundred-year storm. We have had a number of crises leading up to it. These are comparable to five or ten-year storms. Regulators who had successfully dealt with the smaller storms were less successful when they applied the same methods to the hundred-year storm. This goes to show that not all far- from-equilibrium conditions are alike.The picture I am painting is very different from the efficient market hypothesis. I believe it is more realistic, and it offers plenty of scope for further research. This prepares the ground for a specific hypothesis to explain the recent financial crisis. It is not derived from my theory of bubbles by deductive logic. Nevertheless, the two of them stand or fall together.So here it goes. I contend that the puncturing of the subprime bubble in 2007 set off the explosion of a super-bubble, much as an ordinary bomb sets off a nuclear explosion. The housing bubble in the United States was the most common kind, distinguished only by the widespread use of collateralized debt obligations and other synthetic instruments. Behind this ordinary bubble there was a much larger super-bubble growing over a longer period of time which was much more peculiar. The prevailing trend in this super-bubble was the ever increasing use of credit and leverage. The prevailing misconception was the belief that financial markets are self correcting and should be left to their own devices. President Reagan called it the magic of the marketplace, and I call it market fundamentalism. It became the dominant creed in the 1980s when Ronald Reagan was President of the United States and Margaret Thatcher was Prime Minister of the United Kingdom.What made the super-bubble so peculiar was the role that financial crises played in making it grow. Since the belief that markets could be safely left to their own devices was false, the super-bubble gave rise to a series of financial crises. The first and most serious one was the international banking crisis of 1982. This was followed by many other crises, the most notable being the portfolio insurance debacle in October 1987, the savings and loan crisis that unfolded in various episodes between 1989 and 1994, the emerging market crisis of 1997/1998, and the bursting of the Internet bubble in 2000. Each time a financial crisis occurred, the authorities intervened, merged away or otherwise took care of the failing financial institutions, and applied monetary and fiscal stimuli to protect the economy. These measures reinforced the prevailing trend of ever increasing credit and leverage, but as long as they worked, they also reinforced the prevailing misconception that markets can be safely left to their owndevices. It was a misconception, because it was the intervention of the authorities that saved the system; nevertheless these crises served as successful tests of a false belief, and as such, they inflated the super-bubble even further.Eventually the credit expansion became unsustainable and the super-bubble exploded. The collapse of the subprime mortgage market led to the collapse of one market after another in quick succession because they were all interconnected, the firewalls having been removed by deregulation. That is what distinguished this financial crisis from all those that precededit. Those were successful tests that reinforced the process; the subprime crisis of 2007 constituted the turning point. The collapse then reachedits climax with the bankruptcy of Lehman Brothers, which precipitated the large-scale intervention of the financial authorities.It is characteristic of my boom-bust model that it cannot predict in advance whether a test will be successful or not. This holds for ordinary bubbles as well as the super-bubble. I thought that the emerging market crisis of 1997/8 would constitute the turning point for the super-bubble but I was wrong. The authorities managed to save the system and the super-bubble continued growing. That made the bust that eventually came in 2008 all the more devastating.After the bankruptcy of Lehman Brothers on September 15, 2008, financial markets had to be put on artificial life support. This was a sho