WASHINGTON -- President Obama's top economic adviser, Lawrence H. Summers, acknowledged in a speech on Friday that unemployment and job losses were higher than the administration projected and would rise further this year even as the economy showed signs of recovery. "This is obviously a major area of concern," he said. But Mr. Summers, defending the president's $787 billion stimulus package of last February against recent criticism from Republicans and some analysts, said rising job losses were "not a basis for concluding that the recovery act is falling short of its goals."The White House adviser said the two-year stimulus plan of tax cuts and new spending was timed to peak during 2010, with 70 percent of its benefits to be distributed to local governments, businesses and families in the first 18 months. "We are on track to meet that timeline," he said.Mr. Summers, in what the White House billed as "a progress report" on rescuing the economy, pointed out that other independent forecasters also underestimated job losses. He said no one knew for sure why employers had shed so many workers in this downturn. But he suggested several factors: greater productivity that allowed firms to do the same work with fewer workers, bigger financial pressures on companies, and employers' expectations of a prolonged recession.
WASHINGTON -- President Obama's top economic adviser, Lawrence H. Summers, acknowledged in a speech on Friday that unemployment and job losses were higher than the administration projected and would rise further this year even as the economy showed signs of recovery.
"This is obviously a major area of concern," he said. But Mr. Summers, defending the president's $787 billion stimulus package of last February against recent criticism from Republicans and some analysts, said rising job losses were "not a basis for concluding that the recovery act is falling short of its goals."
The White House adviser said the two-year stimulus plan of tax cuts and new spending was timed to peak during 2010, with 70 percent of its benefits to be distributed to local governments, businesses and families in the first 18 months. "We are on track to meet that timeline," he said.
Mr. Summers, in what the White House billed as "a progress report" on rescuing the economy, pointed out that other independent forecasters also underestimated job losses. He said no one knew for sure why employers had shed so many workers in this downturn. But he suggested several factors: greater productivity that allowed firms to do the same work with fewer workers, bigger financial pressures on companies, and employers' expectations of a prolonged recession.
The speech Larry Summers gave at the IIE was sensible and clear-headed. But his discussion of the stimulus and its size was disappointing -- and, I hope, somewhat disingenuous. What Larry said: The size of the stimulus reflected a balance of several considerations: the size of the likely output gap that the economy was facing, the difficulties of ramping up spending and then ramping it back down after recovery in a high budget-deficit environment, the question of how much could be spent both quickly and productively, and the recognition that the Recovery Act was just one of several initiatives by the Administration that would have a dynamic impact on the state of the economy. Look: it was really clear, even in January, that the stimulus wasn't remotely big enough to close the output gap. My analysis at the time here and here. [...] The point is that I can respect the argument that this was all the administration could do, politically. I can't feel equal respect for the argument that this was all it should have done, economically.
The speech Larry Summers gave at the IIE was sensible and clear-headed. But his discussion of the stimulus and its size was disappointing -- and, I hope, somewhat disingenuous.
What Larry said:
The size of the stimulus reflected a balance of several considerations: the size of the likely output gap that the economy was facing, the difficulties of ramping up spending and then ramping it back down after recovery in a high budget-deficit environment, the question of how much could be spent both quickly and productively, and the recognition that the Recovery Act was just one of several initiatives by the Administration that would have a dynamic impact on the state of the economy.
Look: it was really clear, even in January, that the stimulus wasn't remotely big enough to close the output gap. My analysis at the time here and here.
[...]
The point is that I can respect the argument that this was all the administration could do, politically. I can't feel equal respect for the argument that this was all it should have done, economically.
Consider also that a new administration began Jan 20th and many staffers still don't have desks in July. To expect much more in such a short time is too much.
I think everyone expected a further "stimulus" and it was basically implied at the time of passage. In February it was important to pass something, to get the ball rolling, the concept sold and the congressional machine oiled. As Obama checks major policy goals off his list each month (healthcare coming up, looking promising) his power increases. One lesson from the Clinton admin was to make sure to do things in the correct order, this is a lesson the Obama admin has been all over.
If Obama can get the public-option healthcare bill through, which seems fairly likely at the moment, he will be sitting on a ton of political capital and popular goodwill. All it will take now for a real stimulus package (that actually does something other than spread cash about) will be a return to the economic shocks of last September/October. Rumors and expectations I'm seeing time that for the end of August so expect the stimulus talk to heat up in that time frame.
Unemployment has soared by a record 281,000 in three months to total 2.38 million, the highest since before New Labour came to power. Some 7.6 per cent of the workforce is jobless, the highest rate since January 1997, and up by three-quarters-of-a-million on this time last year. The increase over the last quarter was the steepest since the severe recession of 1981. About 1.6 million people are claiming unemployment benefits. Economists called the data "truly horrible". The West Midlands has become the first British region in the current recession to see its unemployment rate reach double figures: 10.3 per cent. Young people are bearing the brunt of the pain. Gordon Brown made his political reputation in the 1980s and 1990s railing against the waste of human talent during the Conservatives' rule, yet today one in five 18-to-24 year olds is jobless; 726,000 youngsters are looking for work. That toll will jump dramatically as more school leavers and graduates sign on this summer. Concern about the economic and social costs of supporting a lost generation of "neets" - those not in employment, education or training schemes - continues to grow. Poignantly, those now leaving school aged 16 and trying to find work or in further education to avoid unemployment will have started primary school in 1997.
Unemployment has soared by a record 281,000 in three months to total 2.38 million, the highest since before New Labour came to power.
Some 7.6 per cent of the workforce is jobless, the highest rate since January 1997, and up by three-quarters-of-a-million on this time last year. The increase over the last quarter was the steepest since the severe recession of 1981.
About 1.6 million people are claiming unemployment benefits. Economists called the data "truly horrible". The West Midlands has become the first British region in the current recession to see its unemployment rate reach double figures: 10.3 per cent.
Young people are bearing the brunt of the pain. Gordon Brown made his political reputation in the 1980s and 1990s railing against the waste of human talent during the Conservatives' rule, yet today one in five 18-to-24 year olds is jobless; 726,000 youngsters are looking for work. That toll will jump dramatically as more school leavers and graduates sign on this summer.
Concern about the economic and social costs of supporting a lost generation of "neets" - those not in employment, education or training schemes - continues to grow. Poignantly, those now leaving school aged 16 and trying to find work or in further education to avoid unemployment will have started primary school in 1997.
TOKYO (Reuters) - Leaders of Japan Inc. believe they have learnt a lesson from the global economic crisis -- namely that the U.S. business model with its eye on short-term gains has failed and it's time to return to longer-term strategies. Recent remarks by corporate chiefs from companies like Suzuki Motor Corp (7269.T) and Chugai Pharmaceutical Co (4519.T) underscore a desire of Japan's corporate leaders to reject pressure from what they see as short-term interests to concentrate on more sustainable returns. In one of the most public displays of the current corporate zeitgeist, Osamu Suzuki, who has steered Suzuki for the last 30 years published an essay in February rejecting what he saw as short-term interests tied to earnings. His views often attract attention, as analysts credit him for having turned his company into a globally-competitive carmaker by making inroads into India decades before it boomed, and expanding revenue more than tenfold. Arguing against calls from some securities analysts to depreciate the company's factories gradually so that near-term earnings would not suffer as much, Suzuki said the automaker's long-term interests were better served by writing down the cost quickly.
TOKYO (Reuters) - Leaders of Japan Inc. believe they have learnt a lesson from the global economic crisis -- namely that the U.S. business model with its eye on short-term gains has failed and it's time to return to longer-term strategies.
Recent remarks by corporate chiefs from companies like Suzuki Motor Corp (7269.T) and Chugai Pharmaceutical Co (4519.T) underscore a desire of Japan's corporate leaders to reject pressure from what they see as short-term interests to concentrate on more sustainable returns.
In one of the most public displays of the current corporate zeitgeist, Osamu Suzuki, who has steered Suzuki for the last 30 years published an essay in February rejecting what he saw as short-term interests tied to earnings.
His views often attract attention, as analysts credit him for having turned his company into a globally-competitive carmaker by making inroads into India decades before it boomed, and expanding revenue more than tenfold.
Arguing against calls from some securities analysts to depreciate the company's factories gradually so that near-term earnings would not suffer as much, Suzuki said the automaker's long-term interests were better served by writing down the cost quickly.
Risk and compliance managers should report to a non- executive director for "quality assurance," rather than to the executives they monitor, [Paul] Moore said. His idea was rejected yesterday in a preliminary government review of banks by former Bank of England director David Walker. Risk managers should report to both executives and non-executives, Walker said. "Joint reporting lines will never work," Moore said. "It will create an accountability crevasse in which responsibility and honesty will be lost." Four years after Moore sued HBOS, then Britain's biggest mortgage lender, for unfair dismissal, the cost of the bank's failed loans and investments is still mounting. A month after Lloyds TSB Group Plc bought the lender in a government-brokered takeover in January, HBOS posted a 7.5 billion-pound ($12.3 billion) loss for 2008. The value of the government's 14.5 billion-pound investment in the combined bank has dropped by 43 percent this year.... "Just at the moment when you're at your most blind, Mr. Chief Executive, is when you need somebody who can give you the opposite view," Moore said. Moore said he has presented his proposals to opposition Liberal Democrat Treasury spokesman Vince Cable, former Conservative Chancellor of the Exchequer Kenneth Clarke, Labour lawmaker John McFall, who led the House of Commons Treasury Committee's investigation into the banking crisis, as well as FSA officials he declined to identify.
Four years after Moore sued HBOS, then Britain's biggest mortgage lender, for unfair dismissal, the cost of the bank's failed loans and investments is still mounting. A month after Lloyds TSB Group Plc bought the lender in a government-brokered takeover in January, HBOS posted a 7.5 billion-pound ($12.3 billion) loss for 2008. The value of the government's 14.5 billion-pound investment in the combined bank has dropped by 43 percent this year....
"Just at the moment when you're at your most blind, Mr. Chief Executive, is when you need somebody who can give you the opposite view," Moore said.
Moore said he has presented his proposals to opposition Liberal Democrat Treasury spokesman Vince Cable, former Conservative Chancellor of the Exchequer Kenneth Clarke, Labour lawmaker John McFall, who led the House of Commons Treasury Committee's investigation into the banking crisis, as well as FSA officials he declined to identify.
SMEs seeking loans to keep them afloat are facing stricter conditions than earlier this year, with banks favouring larger firms, Erik Sonntag, advisor for entrepreneurship and SMEs at BusinessEurope, told EurActiv in an interview. Is it getting any easier for companies to access credit? Yes and no. In our last economic outlook in May, we saw an improvement when it comes to the cost of financing - in terms of interest rates. However, access to credit has become even worse, especially for SMEs. Access has worsened compared to earlier this year. Conditions are now stricter, negotiations are taking longer, and the amounts being loaned are smaller. So are small firms more likely to go out of business than larger, better established companies? There is a worry that larger companies might crowd out SMEs. Usually, SMEs essentially depend on bank loans - access to financial markets is very limited. The problem is that due to the whole financial crisis, larger companies might be thinking they can't go to the capital markets, so they are going to banks. If you are a bank and you have a larger company and a small company asking for credit, you will probably hand the money to the larger one if you perceive it as less risky.
Is it getting any easier for companies to access credit?
Yes and no. In our last economic outlook in May, we saw an improvement when it comes to the cost of financing - in terms of interest rates. However, access to credit has become even worse, especially for SMEs. Access has worsened compared to earlier this year. Conditions are now stricter, negotiations are taking longer, and the amounts being loaned are smaller.
So are small firms more likely to go out of business than larger, better established companies?
There is a worry that larger companies might crowd out SMEs. Usually, SMEs essentially depend on bank loans - access to financial markets is very limited. The problem is that due to the whole financial crisis, larger companies might be thinking they can't go to the capital markets, so they are going to banks. If you are a bank and you have a larger company and a small company asking for credit, you will probably hand the money to the larger one if you perceive it as less risky.
Swedbank and SEB - the leading Swedish banks that dominate the tiny banking markets of Estonia, Latvia and Lithuania - earned big profits as they fuelled the economic boom that followed European Union accession in 2004. For Swedbank last year, the Baltic states represented 17 per cent of lending and 25 per cent of operating profit, while the respective figures for SEB were 13 per cent and 12 per cent. But the countries that formerly fuelled profits at the Swedish banks are now dragging them down. Swedbank and SEB are the most exposed to the Baltic economies suffering the worst downturn in the EU. The Bank of International Settlements estimates that Swedish banks have a potential $80bn exposure to the Baltics, representing 16 per cent of Swedish gross domestic product.
Swedbank and SEB - the leading Swedish banks that dominate the tiny banking markets of Estonia, Latvia and Lithuania - earned big profits as they fuelled the economic boom that followed European Union accession in 2004.
For Swedbank last year, the Baltic states represented 17 per cent of lending and 25 per cent of operating profit, while the respective figures for SEB were 13 per cent and 12 per cent.
But the countries that formerly fuelled profits at the Swedish banks are now dragging them down. Swedbank and SEB are the most exposed to the Baltic economies suffering the worst downturn in the EU. The Bank of International Settlements estimates that Swedish banks have a potential $80bn exposure to the Baltics, representing 16 per cent of Swedish gross domestic product.
New US residential building picked up in June, rising to its highest level in seven months, thanks to low construction costs and government incentives.Housing starts jumped by 3.6 per cent last month to an adjusted annual rate of construction of 582,000, commerce department figures showed on Friday. The rise was more than economists expected and was fuelled by a sharp increase in construction of single-family homes. EDITOR'S CHOICELex: US home foreclosures - Jul-17US homebuilder confidence hits 10-month high - Jul-16In depth: US downturn - Mar-13Friday's results continue a sharp turnaround for home building and signal the stricken housing market may be bottoming out. In April, new construction fell to a 50-year low before rebounding by 17.3 per cent in May. Many economists, however, see the monthly rise as a mixed blessing. Some argue that renewed building activity is a sign of health in the housing market and the wider economy, but others contend that the overhang of housing inventory needs to be slashed for a recovery to occur.
New US residential building picked up in June, rising to its highest level in seven months, thanks to low construction costs and government incentives.
Housing starts jumped by 3.6 per cent last month to an adjusted annual rate of construction of 582,000, commerce department figures showed on Friday. The rise was more than economists expected and was fuelled by a sharp increase in construction of single-family homes. EDITOR'S CHOICELex: US home foreclosures - Jul-17US homebuilder confidence hits 10-month high - Jul-16In depth: US downturn - Mar-13
Friday's results continue a sharp turnaround for home building and signal the stricken housing market may be bottoming out. In April, new construction fell to a 50-year low before rebounding by 17.3 per cent in May.
Many economists, however, see the monthly rise as a mixed blessing. Some argue that renewed building activity is a sign of health in the housing market and the wider economy, but others contend that the overhang of housing inventory needs to be slashed for a recovery to occur.
Green shoots! The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
Volkswagen is planning to purchase all of sports carmaker Porsche, which has run into massive financial problems linked to its overly ambitious plan to take control of VW. The attempted takeover, which had been financed using loans, ultimately failed because of the credit crunch and ensuing liquidity problems that almost saw Porsche go bankrupt. SPIEGEL has obtained information that Volkswagen is planning a complete takeover of beleaguered sports carmaker Porsche in a series of two transactions. The company is planning the imminent purchase of 50 percent of Porsche shares and will purchase the remaining shares in the Stuttgart, Germany-based automobile manufacturer in a second step. Once completed, Porsche will become the 10th brand in the stable of Volkswagen, the world's largest carmaker. DPA Porsche headquarters in Stuttgart: VW has won the power struggle between the two companies. VW's move to acquire Porsche follows a power struggle between the companies. Porsche had sought to buy VW through complicated loan transactions that collapsed when the sports carmaker's liquidity dried up as a result of the credit crunch. It has already been reported that Wolfsburg-based VW would purchase 49.9 percent of Porsche, but SPIEGEL has learned it is now planning a complete acquisition in a second purchase of shares.
Volkswagen is planning to purchase all of sports carmaker Porsche, which has run into massive financial problems linked to its overly ambitious plan to take control of VW. The attempted takeover, which had been financed using loans, ultimately failed because of the credit crunch and ensuing liquidity problems that almost saw Porsche go bankrupt.
SPIEGEL has obtained information that Volkswagen is planning a complete takeover of beleaguered sports carmaker Porsche in a series of two transactions. The company is planning the imminent purchase of 50 percent of Porsche shares and will purchase the remaining shares in the Stuttgart, Germany-based automobile manufacturer in a second step. Once completed, Porsche will become the 10th brand in the stable of Volkswagen, the world's largest carmaker.
DPA
Porsche headquarters in Stuttgart: VW has won the power struggle between the two companies. VW's move to acquire Porsche follows a power struggle between the companies. Porsche had sought to buy VW through complicated loan transactions that collapsed when the sports carmaker's liquidity dried up as a result of the credit crunch. It has already been reported that Wolfsburg-based VW would purchase 49.9 percent of Porsche, but SPIEGEL has learned it is now planning a complete acquisition in a second purchase of shares.
It's not an industry story - unless you count the financial industry as one.
July 17 (Bloomberg) -- Exxon Mobil Corp., the largest U.S. oil company, may be fined more than $1 billion for "malicious" sabotage of wells to prevent other producers from tapping fields it no longer wanted, the Texas General Land Office said. Jerry Patterson, commissioner of the land office that oversees oil leases that help fund Texas schools, asked the Texas Railroad Commission to conduct hearings into an alleged 1990s program at Exxon Mobil of plugging abandoned wells with trash, sludge, explosives and cement plugs. The barriers made it impossible for other producers to revive the wells, Patterson said in a statement he gave to Bloomberg News yesterday. Under Railroad Commission rules, Exxon Mobil could face fines of $10,000 a day per well, Patterson said in the statement, which he plans to release on July 20. He said those penalties could add up to more than $1 billion on wells the company abandoned in 1991 after a disagreement over royalties with the owners, the O'Connor family, a Texas oil dynasty.
July 17 (Bloomberg) -- Exxon Mobil Corp., the largest U.S. oil company, may be fined more than $1 billion for "malicious" sabotage of wells to prevent other producers from tapping fields it no longer wanted, the Texas General Land Office said.
Jerry Patterson, commissioner of the land office that oversees oil leases that help fund Texas schools, asked the Texas Railroad Commission to conduct hearings into an alleged 1990s program at Exxon Mobil of plugging abandoned wells with trash, sludge, explosives and cement plugs. The barriers made it impossible for other producers to revive the wells, Patterson said in a statement he gave to Bloomberg News yesterday.
Under Railroad Commission rules, Exxon Mobil could face fines of $10,000 a day per well, Patterson said in the statement, which he plans to release on July 20. He said those penalties could add up to more than $1 billion on wells the company abandoned in 1991 after a disagreement over royalties with the owners, the O'Connor family, a Texas oil dynasty.
Patients should be charged £20 to see a GP in a bid to limit demands placed on the health service, a centre-right think-tank says.The Social Market Foundation said forcing people to pay a fee for an appointment could help the NHS cope in the tight financial times ahead. The group said it would not breach the values of the NHS as charges already applied to dentistry and prescriptions
Patients should be charged £20 to see a GP in a bid to limit demands placed on the health service, a centre-right think-tank says.
The Social Market Foundation said forcing people to pay a fee for an appointment could help the NHS cope in the tight financial times ahead.
The group said it would not breach the values of the NHS as charges already applied to dentistry and prescriptions
And they want to charge £20 for the privilege? The peak-to-trough part of the business cycle is an outlier. Carnot would have died laughing.
As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
From a newly minted PhD, via e-mail: I ran into another Harvard student who recently had a chat with a senior economics faculty member who is telling students the following anecdote. Apparently the professor is involved in some way with the American Economics Review. The AER has a backlog of two to three years between when papers are submitted and when they appear in print. Some of the papers currently in the pipeline, submitted before the crisis broke, predicted that the U.S. or global economy would remain prosperous and stable for many years to come. The professor wrote to all of these authors, asking them if they would like to withdraw their articles or at least modify them. All refused. Consequently, for something like the next three years, the AER will interleave articles explaining why the crisis occurred with articles explaining why the crisis could not occur.
I ran into another Harvard student who recently had a chat with a senior economics faculty member who is telling students the following anecdote. Apparently the professor is involved in some way with the American Economics Review. The AER has a backlog of two to three years between when papers are submitted and when they appear in print. Some of the papers currently in the pipeline, submitted before the crisis broke, predicted that the U.S. or global economy would remain prosperous and stable for many years to come. The professor wrote to all of these authors, asking them if they would like to withdraw their articles or at least modify them. All refused.
The AER has a backlog of two to three years between when papers are submitted and when they appear in print. Some of the papers currently in the pipeline, submitted before the crisis broke, predicted that the U.S. or global economy would remain prosperous and stable for many years to come. The professor wrote to all of these authors, asking them if they would like to withdraw their articles or at least modify them. All refused.
Consequently, for something like the next three years, the AER will interleave articles explaining why the crisis occurred with articles explaining why the crisis could not occur.
Liquidity, as frequent readers know, is a fascinating topic to Zero Hedge. Liquidity black holes, as one would imagine, is doubly so. However, when a firm like State Street, which is at the heart of the multi-trillion dollar stock lending skeleton of the market discusses both of these concepts, one must pay attention. The below report is a State Street presentation from 2003 discussing what happens in those episodes when liquidity disappears and how that impairs all other axes of proper market function. Of notable attention is the following section of the report: The presence of liquidity problems in the largest of markets suggests that liquidity is not about size, but diversity. In an illiquid market the same size of sell order will push the market down further than in a liquid market. Imagine a market where there is a large number of market participants, using the exact same information set, in the exact same way, to trade the exact same financial instruments. When one buys they all do and vice versa. Market participants would face volatility and illiquidity when they came to buy or sell. This would not be reduced by having more players, only by increasing the amount of diversity in their actions. (Indeed, on these assumptions it is possible to show that the bigger the market was, the less liquid it would be). Now imagine a market with just two players but with opposite objectives or opposite ways of defining value. When one wants to buy the other wants to sell. This market is small, but the price impact of trading would be low and liquidity would be high. The referenced diversity is a crucial concept in today's market where an unprecedented amount of market trades occurs in undiverse dark and HFT pools. As Goldman is becoming the primary conduit of trading (whether principal or agency) in virtually all markets, the risk of a massive liquidity drain becomes exponentially larger, and the risk of an exogenous event approaches LTCM and Lehman levels. It is this key risk driver that regulators should be focusing on, instead of chasing and attempting to punish the perpetrators of the most recent market crash (we are not saying they should not, but they should prioritize and now should focus on what is most critical to maintaining a functioning market topology). The Too Big To Fail is a psychological construct which however does not have parallels in the market. Once Goldman reaches a tipping point of eliminating liquidity diversity, the potential fallout escalates. This is precisely the realm in which any x sigma events will occur in the future. And nobody seems to care.
Of notable attention is the following section of the report:
The presence of liquidity problems in the largest of markets suggests that liquidity is not about size, but diversity. In an illiquid market the same size of sell order will push the market down further than in a liquid market. Imagine a market where there is a large number of market participants, using the exact same information set, in the exact same way, to trade the exact same financial instruments. When one buys they all do and vice versa. Market participants would face volatility and illiquidity when they came to buy or sell. This would not be reduced by having more players, only by increasing the amount of diversity in their actions. (Indeed, on these assumptions it is possible to show that the bigger the market was, the less liquid it would be). Now imagine a market with just two players but with opposite objectives or opposite ways of defining value. When one wants to buy the other wants to sell. This market is small, but the price impact of trading would be low and liquidity would be high.
In an illiquid market the same size of sell order will push the market down further than in a liquid market. Imagine a market where there is a large number of market participants, using the exact same information set, in the exact same way, to trade the exact same financial instruments. When one buys they all do and vice versa. Market participants would face volatility and illiquidity when they came to buy or sell. This would not be reduced by having more players, only by increasing the amount of diversity in their actions. (Indeed, on these assumptions it is possible to show that the bigger the market was, the less liquid it would be). Now imagine a market with just two players but with opposite objectives or opposite ways of defining value. When one wants to buy the other wants to sell. This market is small, but the price impact of trading would be low and liquidity would be high.
The referenced diversity is a crucial concept in today's market where an unprecedented amount of market trades occurs in undiverse dark and HFT pools. As Goldman is becoming the primary conduit of trading (whether principal or agency) in virtually all markets, the risk of a massive liquidity drain becomes exponentially larger, and the risk of an exogenous event approaches LTCM and Lehman levels. It is this key risk driver that regulators should be focusing on, instead of chasing and attempting to punish the perpetrators of the most recent market crash (we are not saying they should not, but they should prioritize and now should focus on what is most critical to maintaining a functioning market topology). The Too Big To Fail is a psychological construct which however does not have parallels in the market. Once Goldman reaches a tipping point of eliminating liquidity diversity, the potential fallout escalates. This is precisely the realm in which any x sigma events will occur in the future. And nobody seems to care.
Official "thinking" seems to be: "If Goldman goes down, we are all dead anyway." That is likely to be true for the existing Wall Street system---at a minimum. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Of notable attention is the following section of the report:The presence of liquidity problems in the largest of markets suggests that liquidity is not about size, but diversity.
The presence of liquidity problems in the largest of markets suggests that liquidity is not about size, but diversity.
