Financial Literacy

A core problem exists in the assumption that what is profitable for an individual entity is profitable for an economy as a whole. This is raised on a divisional/entity level in the Contemporary Accounting textbook: ".. the maximisation of a division's profit may not always ensure the maximisation of the profit of the entity" (p13).

Two articles by the LVRG come to mind on this matter, one is a long-term index of real-estate prices to GDP and the other is a recent empirical study on the correlation of speculative investment to financial collapse.

Investing in resources however is often semi-literate. There is "easy money" in a sense because natural resources are fixed in supply and therefore will tend towards monopolistic profits. However, it is prone (as the Kavanagh-Putland index shows) to sudden collapses in value which has greater flow-on effects to stocks as a whole (particularly if the asset base of that stock value is significantly made up of estate values). Are investors paying attention to the "bubble line" ratio of real-estate sales to GDP? Probably not...