During the Great Depression, American policymakers decided that speculation was best controlled by limiting the speculators’ access to financial leverage. As a result, margin loans were limited by federal law to 50 percent of stock values. This policy has since broken down with the advent of financial derivatives, as the case of LTCM demonstrates in extremis. (Note: LTCM stands for Long-Term Capital Management, a nearly bankrupt hedge fund bailed out by the Federal Reserve Bank of New York in 1998). It has recently been proposed that derivatives should be subject to the same margin limits as conventional stock purchases. Restrictions on speculators’ ability to achieve almost limitless leverage through the derivatives market might lessen the risk of systemic crisis in the financial world. Improved information in the almost unregulated derivatives world would also hinder excessive accumulation of debt, such as occurred at LTCM.

According to the text, Depression Era policy of limiting speculators’ access to financial leverage

Item 1 - has been overturned by new legislation;

Furthermore, the central banker’s main tool for controlling speculation is raising interest rates. As long as speculators continue to anticipate large profits from capital gains they are not deterred by high interest rates. And, as Keynes observed in the 1930s, raising interest rates to control speculation at the end of the business cycle damages the whole economy. The only other tool left to central bankers is to issue warnings to speculators to desist from their activities – what was called “moral suasion” in the 1920s. Time and time again, such warnings have been made by authorities and on no occasion have speculators heeded a word.

According to the text:

Item 2 - Raising interest rates for controlling speculation is a futile exercise if expected capital gains are high.

TEXT

THE THIRD DEGREE

(Edward Chancellor. The devil take the hindmost: a history of

financial speculation. New York: Plume Books, 1999: 345-349.)

John Maynard Keynes’s personal and successful experience of speculation led him to the conclusion that markets were fundamentally inefficient. In his General Theory, Keynes defined speculation as the attempt to forecast changes in the psychology of the market. He likened speculation to a newspaper competition in which the competitors have to pick out six prettiest faces from hundreds of photographs,

“so that each has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view... We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be.”

According to the text, Keynes

Item 4 - reached the conclusion that markets were inefficient through his own personal experience.

A abertura comercial e financeira, intensificada a partir de 1990, provocou alterações importantes na economia brasileira, entre as quais incluem-se:

Item 3 - internalização de vários segmentos da cadeia produtiva na área de insumos industriais até então inexistentes no país;

According to the text, speculation

Item 3 - upheld the Bretton Woods system of fixed currencies;

De 1968 a 1973 a economia brasileira registrou elevadas taxas de crescimento econômico combinadas com taxas de inflação estáveis ou declinantes. Sobre esta fase, denominada de “Milagre Econômico”, é correto afirmar:

Item 3 - O financiamento dos investimentos no período se fez, principalmente, mediante poupança externa.