Re: Thanks Tim, great explanation
"The bonds are already crashing at the mere hint of rising interest rates and the volatility jumps." baseh.
...perhaps because the market conditions that the equations used to gain policy insights assume perfect markets and rational economic man. Garbage in --- garbage out.
As long as the average size of players in the casino grows and their size distribution polarises between large and small volatility will only get worse. You 'solid' pension funds are 'managed' by big players. Your mortgage participation units are agglomerated by big players and your 'solid' investments are in big players themselves.
It can only get worse.... until every player, and association of players acting in concert, is statutorily limited in size so that their individual actions are always too small and spaced in time to move the markets in any noticeably way.
Market economies are good... real ones.