Central Bankers Need Instant Gratification

16.03.2016 • Emerging Markets

From Port Phillip Insider (AUS) – The term is ‘delayed gratification’.

There’s a reasonably well-known study that shows those who can wait for their reward, tend to be smarter and more well-adjusted people than those who can’t.

Not only that, but those who can’t wait for a reward have a higher percentage chance of being dishonest, and even having a criminal tendency.

To test this theory, researchers took a bunch of kids. Then, one at a time, took them into a room and placed a marshmallow in front of them. The kids were told that they could have the marshmallow now, or if they waited five minutes, they could have two marshmallows.

Surprisingly, a large proportion of the kids just couldn’t wait. They had to have the single marshmallow straight away.

(I think I saw this on an episode of Dr Phil that the missus was watching a few months ago. I pretended to be reading a book, but was secretly glancing over the top of the page at the screen.)

Furthermore, it turns out those who could wait tended to be smarter than those couldn’t wait.

I’m not sure what that tells us about the markets. But on Thursday, European markets fell, even though European Central Bank president, Mario Draghi, cut interest rates (again) and announced an increase in the money printing program.

But the markets didn’t stay down for long. The next day, European markets soared. The Euro Stoxx 50 index gained 3.5%. And last night, it added another 0.6%.

Is it possible that European investors eschewed instant gratification and instead opted for delayed gratification?

Does that mean European investors are smarter than we thought?

Probably not.

-Read More Here-

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