Financial topics

[aedens]

This technique is familiar to anyone who remembers the politics of the USSR: vote all you want, but there is just one possible result.

http://synonblog.dailymail.co.uk/2013/0 ... cracy.html

https://www.youtube.com/watch?v=XmMwo1Xzgus age
https://www.youtube.com/watch?v=uY8uQoA1g5Q

[gerald]

John,
Was reading an interview with Nassim Taleb and noticed that Generational Dynamics came up. For all of your efforts, it's good to know that the world is listening.
http://www.reddit.com/r/IAmA/comments/1 ... agile_ama/

[–]nntaleb[S] 85 points 2 days ago
Rule: any company that would cause a national emergency requiring a bailout should it fail should be classified BAILABLE-OUT and employees should not be allowed to earn more than civil servants. That would force companies to 1) be small, 2) not leech off the taxpayer.
permalinkparent
[–]locster 7 points 2 days ago
However, if that rule/law were imposed then one or two generations down the line it's likely that it would start to be slackened as people forgot why it was there (or ceased to feel as emotional about the issue as we do now). (See: Generational dynamics) Hence, are we doomed to always be in a cycle of global crash and post crash rebuilding?

Nassim Taleb's recent book "Antifragile" published 2012 is a great read. His historical comments, observations on life and general topics are very insightful and eye opening. It contributes to an understanding of where we are today.
I would highly recommend "Antiragile"

[Higgenbotham]

It also interesting, having read the history of many financial crises during 5 centuries of ascendant Western Civilization, how this one appears to be evolving differently in one aspect. That is when the Central Banker threw in the towel and said there's nothing more we can do. Consider the following, previously posted, regarding the crisis of 1825 -

"We lent it," said Mr. Harman, on behalf of the Bank of England, "by every possible means and in modes we had never adopted before; we took in stock on security, we purchased Exchequer bills, we made advances on Exchequer bills, we not only discounted outright, but we made advances on the deposit of bills of exchange to an immense amount, in short, by every possible means consistent with the safety of the Bank, and we were not on some occasions over-nice. Seeing the dreadful state in which the public were, we rendered every assistance in our power."

- where every hegemonic power throughout 5 centuries, so far as I am aware, has by "means consistent with the safety of the bank" and only consistent with the safety of the bank, rendered aid, until Bernanke. I can find similar quotes from Federal Reserve officials made during the 1930s - I know they are out there. It seems to me that it was in 2010 that Bernanke, inconsistent with the safety of the bank, went down a different path and put himself into an irreversible hole with QE2 and QE3.

...Bernanke, 59, said in response to a question at a press conference today at the Fed headquarters in Washington, “I don’t think I’m the only person in the world who can manage the exit” from the central bank’s record stimulus.

Liar. He's only 59. If it were so easy, he would do it himself and take the gold star.

[Higgenbotham]

The quote above that contains "consistent with the safety of the bank" is from Bagehot's Lombard Street.

Former U.S. Treasury Secretary Lawrence Summers, in the course of his long
answer, said:
There is a lot in [Walter] Bagehot that is about the crisis we just went through.
There is more in [Hyman] Minsky, and perhaps more still in [Charles] Kindleberger...1

Walter Bagehot (1826-1877) refers to his Lombard Street, published in 1873.2
Hyman Minsky (1919-1996) is a twentieth-century observer and theorist of
financial crises best approached not through his books3 or his collected essay
volume—Can “It” Happen Again?—but rather through the use that economic
historian Charles Kindleberger (1910-2003) made of his work in Kindleberger’s
1978 Manias, Panics, and Crashes: A History of Financial Crises.4 Asked to name
where to turn in the works of economists to understand what was going on in
2005-2011, Summers cited three dead economists—one of them long dead.

http://delong.typepad.com/20120411-russ ... -paper.pdf

Bagehot’s famous dictum, in Lombard Street, was that, to avert panic, central banks should lend early and freely (ie without limit), to solvent firms, against good collateral, and at ‘high rates’.

http://www.bankofengland.co.uk/publicat ... ech390.pdf

Two things that come to mind. One is that when asked who provided a blueprint for the financial crisis, these supposed geniuses could not come up with anybody within their own ranks. Two is that once they grabbed onto something they did not apply it properly.

[Higgenbotham]

Hegemonic stability theory (HST) is a theory of international relations. Rooted in research from the fields of political science, economics, and history, HST indicates that the international system is more likely to remain stable when a single nation-state is the dominant world power, or hegemon.[1] Thus, the fall of an existing hegemon or the state of no hegemon diminishes the stability of international system.

In order for a nation-state to rise to the level of hegemon, there are some attributes it must or is more advantageous to have.

First of all, it must have political strength, military force, and superior national power that is necessary for its ability to forge new international laws and organizations. In terms of military force, a standing defensive army is not enough. A superior navy, or air force is.

Secondly, a hegemon must have a large and growing economy. Usually, unrivaled supremacy in at least one leading economic or technological sector is necessary.

Thirdly, a hegemon must have will to lead, and the will to establish a hegemonic regime, as well as the capability to lead and enforce the rules of the system.

In addition to structural power, the U.S. has many resources. It unilaterally helped Mexico in the Peso Crisis and unilaterally helped Russia with economic aid.

http://en.wikipedia.org/wiki/Hegemonic_stability_theory

[Higgenbotham]

Speeches by Richard W. Fisher
Dallas, Texas | December 18, 2008
Historical Perspectives on the Current Economic and Financial Crisis
(With Reference to Paul Volcker, Washington Irving, Walter Bagehot, Mother Caris, Rube Goldberg and Bismarck)
Remarks before the World Affairs Council of Dallas/Fort Worth and the Dallas Committee on Foreign Relations

We at the Federal Reserve have dusted off our Thornton and Bagehot and then some. We have been neither “scanty nor slow” in addressing the pathology of our economy and financial system. We have “lent by every possible means and in modes … consistent with the safety of the bank.” And just two days ago, we made clear that despite having reduced the target range for the federal funds rate to between zero and 0.25 percent—the old orthodoxy—we will not shy from pursuing every practicable means of supporting the functioning of financial markets and stimulating the economy back to a steady state by employing new techniques that fit the current circumstance.

We have studied the mistakes made by other lenders of last resort who failed to properly deploy their forces in times of distress, such as the Federal Reserve in the 1930s and the Bank of Japan in the 1990s. And we have reviewed the actions taken by others more successful, such as those of the Swedish Riksbank in response to their banking crisis of the early 1990s.

I assure you the Federal Reserve has not abandoned the wisdom of Milton Friedman or Walter Bagehot or any of the other patron saints of central banking. But these are complex, trying times. Our economy faces a tough road. We are the nation’s central bank and we are duty bound to apply every tool we can to clean up the mess that has soiled the face of our financial system and get back on the track of sustainable economic growth with price stability. The men and women of the Federal Reserve spend every waking hour doing their level best to perform their duty. Even if we have to deploy a little Rube Goldberg engineering to get the task done.

Some of our innovative contraptions have begun to work. For example, the London interbank offered rate, known by its acronym LIBOR, has come down handsomely.

http://www.dallasfed.org/news/speeches/ ... 081218.cfm

I wonder if he was aware that LIBOR was being manipulated.

[Higgenbotham]

We have studied the mistakes made by other lenders of last resort who failed to properly deploy their forces in times of distress, such as the Federal Reserve in the 1930s and the Bank of Japan in the 1990s.

THE WEEKEND INTERVIEW
October 18, 2008
Anna Schwartz
Bernanke Is Fighting the Last War 'Everything works much better when wrong decisions are punished and good decisions make you rich.'

This was [his] claim to be worthy of running the Fed,” she says. He was “familiar with history. He knew what had been done.” But perhaps this is actually Mr. Bernanke’s biggest problem. Today’s crisis isn’t a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure. “I don’t see that they’ve achieved what they should have been trying to achieve. So my verdict on this present Fed leadership is that they have not really done their job.

http://online.wsj.com/article/SB122428279231046053.html


Guy Sorman
Monetarism Defiant
Legendary economist Anna Schwartz says the feds have misjudged the financial crisis.

Yet isn’t Bernanke a disciple of Friedman and Schwartz? He publicly refers to them as mentors, and, thanks to their scientific breakthrough, he has famously declared that “the Great Depression will not happen again.” Bernanke is right about the past, Schwartz says, “but he is fighting the wrong war today; the present crisis has nothing to do with a lack of liquidity.”

http://www.city-journal.org/2009/19_2_e ... wartz.html

[Higgenbotham]

So if they had let the stock market crash in 2008 - things would have been bad, maybe 1930's depression bad, but the government, infrastructure, and "system" would still be intact.

Since they refused to let the markets correct themselves they have spread the "insolvency" throughout the U.S. and even the worldwide financial system.

The bailouts and QE have bought us time, but in the long run the collapse is going to be much deeper and worse because of it?

Anna Schwartz agreed that mistakes were made by the Fed as early as 2008.

[aedens]

Hegemonic stability theory (HST) is a theory of international relations.

Due process, Rule of law and read the damn bill bill first before you sign it would be a good start.
Voters deserve every damn gosplan until they end up cyprused and broken. They are well on there way.

[vincecate]

Anna Schwartz

I think she basically said that it is not a liquidity crisis it is a solvency crisis. Pettis is saying the same thing. He also points out that at the start of every solvency crisis they claim it is a liquidity crisis.

When do we call it a solvency crisis?
http://www.mpettis.com/2013/03/21/when- ... cy-crisis/