I suspect Trump won't have the power to cap credit card interest rates either, but I saw Bill Ackman suggesting that credit card companies would simply stop issuing credit to risky individuals. If high risk individuals are cut off from credit, that would lower consumption, I assume. Are there any models which predict the net effect on welfare and economic growth? Are there work-arounds? for example, the Islamic world bans usury, but has figured out ways to issue loans through semantic loopholes. If the populist right and left combine to issue bans on high-interest loans, how might the market adjust? A black market via the mafia? Or payday loans?
"You would consider it absurd to say that a hedge fund buying stocks is what was responsible for the stock price rising!"
What?
Additional buyers is precisely what causes the price to rise. That is practically the definition of a stock price increase. What other possible mechanism is there? The stock market might be the purest example of supply & demand impact on price. And A hedge fund is likely to buy more of a stock than an individual, and thus will move the price even more. The impact of an individual buy might be small, but of course it is there.
Thank you for the exploration of this topic that has frequently crossed my mind over recent years. During research, did you by any chance come across papers exploring this for the UK?
I suspect Trump won't have the power to cap credit card interest rates either, but I saw Bill Ackman suggesting that credit card companies would simply stop issuing credit to risky individuals. If high risk individuals are cut off from credit, that would lower consumption, I assume. Are there any models which predict the net effect on welfare and economic growth? Are there work-arounds? for example, the Islamic world bans usury, but has figured out ways to issue loans through semantic loopholes. If the populist right and left combine to issue bans on high-interest loans, how might the market adjust? A black market via the mafia? Or payday loans?
Good points. But I don't think consumption is that relevant a measure. I wrote on this here:
https://davidrhenderson.substack.com/p/whats-wrong-with-trumps-proposed
"You would consider it absurd to say that a hedge fund buying stocks is what was responsible for the stock price rising!"
What?
Additional buyers is precisely what causes the price to rise. That is practically the definition of a stock price increase. What other possible mechanism is there? The stock market might be the purest example of supply & demand impact on price. And A hedge fund is likely to buy more of a stock than an individual, and thus will move the price even more. The impact of an individual buy might be small, but of course it is there.
Thank you for the exploration of this topic that has frequently crossed my mind over recent years. During research, did you by any chance come across papers exploring this for the UK?
Good work! We have a (non-technical) review on the same topic here: https://underreviewmag.substack.com/p/would-banning-wall-street-landlords