OK, maybe that is a little provocative. But here’s the reasoning. Any effective special resolution regime for banks has to intervene early. That means sometimes seizing banks (particularly too big to fail banks) which are well capitalised and liquid because the supervisor thinks that it is better for the system to act [...]
A frequent correspondent pointed me in the direction of the recent IATA air passenger and freight statistics. They give a useful counterpoint to the Baltic Dry Index. Freight first:
You can probably guess what Passenger looks like, given BA’s results:
My guess is that the freight index is a more useful guide to global trade [...]
Bank of England’s Deputy Governor Paul Tucker gave a speech yesterday which FT alphaville picked up. He is surprised by something that doesn’t shock me in the least:
…it would be good if regulators, internationally, required all banks regularly to turn over a meaningful share of their ’stock liquidity’ in the market on a reasonably [...]
As I write this, Manchester United are on the verge of their champion’s league final with Barcelona. I’m cheering for Barca, but I have to admit that Man U are a success. They are one of Europe’s great teams, for now at least.
Let’s compare them with RBS. If Man U screw up [...]
Hat tip the Guardian data blog.
Update. Krugman’s take is here. The one line summary: does the big inflation scare make any sense? Basically, no.
I get the sense that if I ever met George Monbiot, I’d dislike him. He often comes over as ignorant and opinionated. He’s angry a lot of the time too. But none of this makes him wrong. And in yesterday’s Guardian he was spectacularly right about PFI.
PFI allows consortiums of banks, [...]
I will ignore for a moment the fact that Epicurian Dealmaker does not make very accurate use of the term `psychogeography’ (see Mind Invaders for a reasonable if amusingly partial introduction), and answer his question. First he quotes Tolstoy, the important part being
A Russian is self-assured just because he knows nothing and does not [...]
Rick Bookstaber has an interesting if flawed post on the neue sachlickeit in derivatives:
Assume we get to the point of standardized swaps and derivatives instruments that are exchange traded and backed by a clearing corporation. These instruments will create a high hurdle for any non-standard OTC product a bank wants to put into the market. [...]
I had cause recently to muse on the rather variable cost of a pixel. It’s like this.
Pentax has a new digital camera out. It’s called the K-7, it is apparently quite nice, and the body will cost roughly £1,200. It will produce images with 15 million pixels. This is fairly typical [...]
There is a lot of comment around at the moment about how broken finance is: here, for instance, is a piece by Pablo Triana. And certainly there are many, many issues that we have no idea how to deal with in practice, including fat tails, autocorrelation, correlation smiles, and hidden systematic risks. These [...]
A few shots of the Anish Kapoor installations at the Brighton Festival.
Via Alea, ten years worth of stock price as an audio file. Isn’t that nice? More details here.
And other goat derivatives. I’m not joking. The BBC is, though. (This link may not work if you are outside the UK – I’m not entirely sure, but my apologies if it doesn’t.)
Many years ago, my research work was in concurrency theory. Therefore it was a bit of a surprise to find the Guardian asking Is concurrency to blame for spread of HIV in Africa? Fortunately it turns out to be a different sort of concurrency. It was a nasty moment, though. Any [...]
In a comment on the non-classical cost benefit analysis post of a few days ago (a title, I think you will agree, of gigantic pretention), Dave said:
I agree with your conclusions: that uncertainty and moral hazard can make CBA unreliable and sometimes it is better to rely on qualitative objectives.
But I disagree with your applying [...]
In the FT, Aline van Duyn comments on the Geithner derivatives reforms:
In Mr Geithner’s vision, banks, investors and companies that use derivatives will have to register their activity. In this way, regulators will be able to see the whole picture of risk that has been built up in the financial system. These players in derivatives [...]
…as the FT says, will be felt mostly by the banksWhat is interesting about this is how vintage insensitive it is. In the US, there is a world of difference between the 2005s and the 2007s: in Spain, not so much.
Update. Downgrades loom for the Spanish banks as an interest diversion test is [...]
Lewis Page writes sharply and well on defence procurement. He’s a sample:
defence manufacture brings us a measly billion or two in exports each year – and our arms industry requires the great bulk of the £15Bn defence materiel budget in spending to win us this rather paltry amount of trade.
Put that way, the claim [...]
Remember Schroedinger’s cat? Poor moggy is trapped in a box with a radio active isotope. The isotope decays randomly. Let’s say that there is half a chance of detecting a beta particle using a detector inside the box during some time interval. If the particle is detected, then poison gas is [...]
(The fate of the monolines was sealed by the risk they wrote in 2005-2007, so day 1000 is if anything conservative – it takes insurers a long time to die thanks to their accounting and the pay as you go nature of the claims against them.)
In a move so predictable it hardly raises a yawn, [...]
Bruce Krasting has an interesting story on sub-prime related litigation in Massachusetts:
Goldman has agreed to pay the state of Massachusetts $60 million to settle a dispute regarding Goldman’s “predatory lending” practices in and around Boston. $50 million will be made available to reduce the loan principle on 714 individual mortgages… In the critical years [...]
This is an idea of Steve Randy Waldman’s, and I like it.
The basic idea is that you have a deferrable CB. That is, a fixed rate bond which pays coupons, but where the issuer can defer the coupon without it being a default event. Many preference shares are like this, for instance.
The bond [...]
Krugman fears lost decade for US due to half-steps reports Reuters.
Elsewhere, George Soros leads growing chorus of ‘green shoots’ optimists.
I don’t know who is right. I can’t even make a good guess. But it is an interesting question. Opinions seem more divided now than at any time in the last six months [...]
An article by David Mitchell from Sunday’s Observer is so full of sense, and so nicely written that I want to quote quite of lot of it. It concerns the pathetic whingeing of the car lobby that they are sometimes caught breaking the law and even *gasp* punished for it (although not very much).
Apparently, [...]
Are student loans a good idea?
Certainly as they are implemented in the UK, they serve no one well. The level of tuition fees is set too low to fund Universities properly. (The under funding of higher education gives the lie to Blair’s ‘Education, Education, Education’. Schools might have done well under Labour, [...]
The beginnings of control theory can be summarised as ‘nail it in the right place’. Suppose there’s a plank over a barrel. You can keep the plank level by putting a weight in just the right place, so that it balances.
The problem with this is that any perturbation will cause the plank to [...]
Bloomberg says Geithner Bets U.S. Can Avoid Japan Trap Through Bank Earnings.
For that bet to come off, US banks have to earn lots of money.
What’s the major determinant of bank earnings that Geithner can control? The shape of the curve. Banks make money if their short term cost of funds is lower than [...]
The WSJ reminds us that despite the SEC’s lamentable record, US regulatory reforms seems as far off as ever. How badly did they do? Here’s my assessment.
Supervisor of investment banks: 0/5. There are none left. That really does tell you all you need to know.
Market supervisor: 2/5. Rule SHO didn’t [...]
The news that Obama has recently had a meeting with two of his fiercest critics, Krugman and Stiglitz, does him credit. I think there is more to it than the title of the post: it suggests maturity that Obama is willing to listen to different views. One can’t imagine Gordon Brown, for instance, [...]
Charles Butler, looking at the same Jonathan Hopkin post I talked about earlier, comments:
We may find the right wing to be insufferably and unacceptably stupid since the time that the same Ronald Reagan took office, but the left has descended into the ethical black hole of defending only a restricted number of vested interests.
Would that [...]
Over the last few days I have cycled over sixty miles (for pleasure – business is not going that badly). Somewhere around mile 50, it occurred to me just how amazing public transport is. I can get further in an hour by train than I can cycle comfortably in a day under my [...]
Jonathan Hopkin makes a good point:
Almost as distressing as the collapse of the free market model of free-wheeling finance is the failure of the Left in the West to say anything very much about it.
So far so obvious, and so depressing. But Hopkin insightfully contrasts this failure to an earlier triumph.
Karl Polanyi’s masterpiece ‘The [...]
I went to a big science talk this week. The details aren’t particularly important, but the discussion of the budget process was. The speaker contrasted an earlier regime, where he had had a budget that was deliberately set lower than the expected cost of his projects, with an over-run expected, with the current [...]
Naked Capitalism has a typically engaging post on transaction liquidity.
One of the arguments apparently being made in Washington by those who oppose regulation of credit default swaps is that it would reduce liquidity and that of course would be a terrible thing.
Fair enough. A priori it is not clear if having transaction liquidity is [...]
Watching the monolines die is a bit like listening to Fidelio. Intellectually you know that it going to end, but there are times when it feels like it cannot happen fast enough. Now we seem to have moved past the Komm, Hoffnung of Act 1 – there is no hope – and the [...]
David Davis, writing in the FT, sets out Tory policy:
The first stages of an austerity regime, involving pay and recruitment freezes for the entire public sector, will be controversial and uncomfortable.
It is likely that this will be policy for the next government, and it scares me rigid.
