Spain is calling on Brussels to intervene in the restructuring of General Motors' European unit Opel amid fears that a politicized carve-up may lead to mass layoffs in car plants across the continent. The Financial Times newspaper reports that Spanish Industry Minister Miguel Sebastian wrote to European commissioners asking them to guarantee Opel's rescue is based on "financial and commercial" criteria. Sebastian insisted that any reorganization by Opel's planned new owners, Canadian auto parts group Magna International, must "make best possible use of the company's assets." The newspaper suggests that is a veiled reference to Opel's factory in the northern Spanish city of Zaragoza, which, according to leaked GM documents, is listed as one of the most efficient in Europe.
The Financial Times newspaper reports that Spanish Industry Minister Miguel Sebastian wrote to European commissioners asking them to guarantee Opel's rescue is based on "financial and commercial" criteria.
Sebastian insisted that any reorganization by Opel's planned new owners, Canadian auto parts group Magna International, must "make best possible use of the company's assets."
The newspaper suggests that is a veiled reference to Opel's factory in the northern Spanish city of Zaragoza, which, according to leaked GM documents, is listed as one of the most efficient in Europe.
From Reuters: S&P cuts MBIA, MBIA Insurance as losses continue Standard & Poor's on Monday cut its ratings on MBIA Inc and its structured finance insurance arm, MBIA Insurance Corp, citing an expectation the company will continue to take significant losses from insuring risky loans. ... The outlook for both companies is negative ...
Standard & Poor's on Monday cut its ratings on MBIA Inc and its structured finance insurance arm, MBIA Insurance Corp, citing an expectation the company will continue to take significant losses from insuring risky loans. ... The outlook for both companies is negative ...
We are at the point of maximum confusion in the multi-year transition of the global economy, markets and policymaking. We have left the global growth regime that was driven primarily by debt-financed consumption in the US, but we have not as yet reached a position of more balanced, albeit anaemic, growth. Those who lack a robust anchoring framework, be they investors or policymakers, risk being misled and backtracking to outdated ways of thinking. The signs of inappropriate reversion are multiplying. Confusing temporary factors for sustainable ones, a growing number of analysts have extended the ongoing stimulus/inventory bounce to a V-like recovery next year and beyond. The momentum for meaningful financial reform is stalling in spite of clear evidence that financial activities have far outpaced the regulatory infrastructure. And some banks are returning to the bad habits that almost destroyed them....Today's lack of appropriate anchoring frameworks appears to be exacerbating short-termism. The issue goes well beyond the still-limited appreciation of the multi-year realignment of the global economy, which is gaining momentum. It also relates to tendencies well-documented by behavioural economists - such as framing the problem wrongly and refusing to question past approaches....These considerations serve to accentuate the inconsistency between market valuations and the reality facing companies and economies. Today's markets - be they industrial country equities or corporate bonds - have priced in vigorous growth for 2010. Valuations assume companies will be able robustly to grow earnings through higher revenues, not renewed reliance on the cost reductions that have propelled earnings in the past six months. For that, they are depending on what is likely to prove to be an elusive high-growth scenario for 2010.
The signs of inappropriate reversion are multiplying. Confusing temporary factors for sustainable ones, a growing number of analysts have extended the ongoing stimulus/inventory bounce to a V-like recovery next year and beyond. The momentum for meaningful financial reform is stalling in spite of clear evidence that financial activities have far outpaced the regulatory infrastructure. And some banks are returning to the bad habits that almost destroyed them....Today's lack of appropriate anchoring frameworks appears to be exacerbating short-termism. The issue goes well beyond the still-limited appreciation of the multi-year realignment of the global economy, which is gaining momentum. It also relates to tendencies well-documented by behavioural economists - such as framing the problem wrongly and refusing to question past approaches....These considerations serve to accentuate the inconsistency between market valuations and the reality facing companies and economies. Today's markets - be they industrial country equities or corporate bonds - have priced in vigorous growth for 2010. Valuations assume companies will be able robustly to grow earnings through higher revenues, not renewed reliance on the cost reductions that have propelled earnings in the past six months. For that, they are depending on what is likely to prove to be an elusive high-growth scenario for 2010.
Japanese consumer prices posted their sharpest decline last month since records began in the early 1970s, fuelling fears that persistent deflation could weaken the country's nascent recovery.Core consumer prices excluding fresh food, which have been falling since March, dropped 2.4 per cent in August from a year ago, compared with a 2.2 per cent decline in July, according to figures from the Statistics Bureau....While most developed economies in the world are expected to battle with inflation in the coming months, deflation in Japan is likely to persist into 2010 because of weak consumer demand, excess capacity and the strength of the yen, according to David Cohen at Action Economics in Singapore.
Core consumer prices excluding fresh food, which have been falling since March, dropped 2.4 per cent in August from a year ago, compared with a 2.2 per cent decline in July, according to figures from the Statistics Bureau....While most developed economies in the world are expected to battle with inflation in the coming months, deflation in Japan is likely to persist into 2010 because of weak consumer demand, excess capacity and the strength of the yen, according to David Cohen at Action Economics in Singapore.
I could sure use some bad where I live. Food is up. Tolls are up. Fuel fell, but increased again. Internet and phone prices always suck large.
Screw the economy that requires ever ascending consumption and price levels. Gimme some of that bad price decline. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
A number of explanations have been proposed for the great boom and bust, most of which focus on greed, overconfidence, and downright stupidity on the part of mortgage lenders, investment bankers, and Wall Street C.E.O.s. According to a common narrative, we have lived through a textbook instance of the madness of crowds. If this were all there was to it, we could rest more comfortably: greed can be controlled, with some difficulty, admittedly; overconfidence gets punctured; even stupid people can be educated. Unfortunately, the real causes of the crisis are much scarier and less amenable to reform: they have to do with the inner logic of an economy like ours. The root problem is what might be termed "rational irrationality"--behavior that, on the individual level, is perfectly reasonable but that, when aggregated in the marketplace, produces calamity.
But society can't afford it when 1 million other families make the same choice. In Finland, it would require the output of a dedicated nuclear reactor.
Or the same idea can be applied to litter. One wrapper dropped in the street is not a problem. Thousands are.
Sam Loyd (1841 - 1911), the American puzzler and 'recreational mathematician' has a rather un-PC visual puzzle called the 'Vanishing Chinaman.' 12 chinamen are printed around the edge of a double dial, with one dial slightly large than the other. The figures are half on the inner dial and partly on the outer dial. But rotating the dial causes the 'appearance' of a thirteenth chinaman.
i.e. how fractional amounts become a problem when multiplied ;-) You can't be me, I'm taken
The idea behind superrationality is that two logical thinkers analyzing the same problem will come up with the same, correct, answer. For example, if two persons are both good at arithmetic, and both have been given the same complicated sum to do, it can be predicted that both will get the same answer before the sum is known. In arithmetic, knowing that the two answers are going to be the same doesn't change the value of the sum, but in game theory, knowing that the answer will be the same might change the answer itself.
Superrationality is an alternative way to reason. First, it is assumed that the answer to a symmetric problem will be the same for all the superrational players. Thus the sameness is taken into account before knowing what the strategy will be. The strategy is found by maximizing the payoff to each player, assuming that they all use the same strategy. Since the superrational player knows that the other superrational player will do the same thing, whatever that might be, there are only two choices for two superrational players. Both will cooperate or both will defect depending on the value of the superrational answer. Thus the two superrational players will both cooperate, since this answer maximizes their payoff. Two superrational players playing this game will each walk away with $100. Note that a superrational player playing against a game-theoretic rational player will defect, since the strategy only assumes that the superrational players will agree. A superrational player playing against a player of uncertain superrationality will sometimes defect and sometimes cooperate.
Note that a superrational player playing against a game-theoretic rational player will defect, since the strategy only assumes that the superrational players will agree. A superrational player playing against a player of uncertain superrationality will sometimes defect and sometimes cooperate.
One example discussed by Hofstadter is the platonia dilemma: an eccentric trillionaire contacts 20 people, and tells them that if one and only one of them sends him a telegram (assumed to cost nothing) by noon the next day, that person will receive a billion dollars. If he receives more than one telegram, or none at all, no one will get any money, and cooperation between players is forbidden. In this situation, the superrational thing to do (if it is known that all 20 are superrational) is to send a telegram with probability p=1/20, which maximizes the probability that exactly one telegram is received. Notice though that this is not the solution in a conventional game-theoretical analysis. Twenty game-theoretically rational players would each send in a telegram and therefore receive nothing. This is because sending the telegram is the dominant strategy; if an individual player sends a telegram he has a chance of receiving money, but if he sends no telegram he cannot get anything.
Notice though that this is not the solution in a conventional game-theoretical analysis. Twenty game-theoretically rational players would each send in a telegram and therefore receive nothing. This is because sending the telegram is the dominant strategy; if an individual player sends a telegram he has a chance of receiving money, but if he sends no telegram he cannot get anything.
With a superrational strategy, people only invest a fraction of their available wealth, such that if everyone invests the same fraction they don't go bankrupt. The "rational" strategy for each individual can well be to invest more, even with leverage, in order to capture more for themselves. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Chuk Prince (The Citi CEO) said it best: "as long as the music plays, we have to dance" What amazed me most in 2006-07 was the number of bankers that were expecting a crash, even hoping to benefit from it (and thus were planning to do exactly that) but yet were still playing the games according to the rules of the over-inflate bubble they knew they were in ("covenant-lite" loans, "pik" (payment in kind) loans, extreme leverage, rockbottom pricing of risk).
What amazed me most in 2006-07 was the number of bankers that were expecting a crash, even hoping to benefit from it (and thus were planning to do exactly that) but yet were still playing the games according to the rules of the over-inflate bubble they knew they were in ("covenant-lite" loans, "pik" (payment in kind) loans, extreme leverage, rockbottom pricing of risk).
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Here's a little table I put together with numbers from the OCC -- page 9 of this pdf. Using second-quarter numbers for each year, I looked at the total nominal derivatives exposure of end users -- the people for whom derivatives are meant to exist -- and for dealers. The results are pretty startling: while end-users have pared their derivatives exposure to a seven-year low, dealers have increased theirs to yet another all-time high. And as the OCC notes, when we say "dealers", we really mean four banks in particular: JP Morgan Chase, Goldman Sachs, Bank of America, and Citibank. Oh, and did I mention? The amounts here are in trillions. Year End Users Dealers Ratio 2003 2.6 62.4 24.0 2004 2.5 76.9 30.8 2005 2.5 96.2 38.5 2006 2.6 110.1 42.3 2007 2.6 138.1 53.1 2008 2.8 163.9 58.5 2009 2.4 187.6 78.2 What has happened in recent years that derivatives dealers now need $78 in nominal derivatives exposure for every $1 in end-user exposure? When Adair Turner talks about "profitable activities so unlikely to have a social benefit, direct or indirect, that [banks] should voluntarily walk away from them", this is surely a prime example of what he has in mind.
The results are pretty startling: while end-users have pared their derivatives exposure to a seven-year low, dealers have increased theirs to yet another all-time high. And as the OCC notes, when we say "dealers", we really mean four banks in particular: JP Morgan Chase, Goldman Sachs, Bank of America, and Citibank.
Oh, and did I mention? The amounts here are in trillions.
What has happened in recent years that derivatives dealers now need $78 in nominal derivatives exposure for every $1 in end-user exposure? When Adair Turner talks about "profitable activities so unlikely to have a social benefit, direct or indirect, that [banks] should voluntarily walk away from them", this is surely a prime example of what he has in mind.
What has happened in recent years that derivatives dealers now need $78 in nominal derivatives exposure for every $1 in end-user exposure?
WTF?
Why aren't these peoples' heads on metaphorical democratically-sponsored pikes yet?
"profitable activities so unlikely to have a social benefit, direct or indirect, that [banks] should voluntarily walk away from them",
what values of profit are so low that a bank would walk away from it ? We know that the music is playing, we know that profit is made and we now know that if the music stops, they'll come cap in hand to us and our lords and masters will cough up.
they have to be stopped; forcibly, because they themselves see no reason to stop. But our elites are so easily bribed and lack the insight to see that which any 5 year old could see keep to the Fen Causeway
Goldman Sachs Group Inc (NYSE:GS - News) expects to benefit from the new over-the-counter derivatives and commodity trading rules owing to its strong technology position, said a Citigroup analyst, who met with Goldman management, and raised his earnings outlook for the bank. "Standardized central clearing of OTC derivatives are likely to force a major electronification of derivatives trading, which may play to Goldman's advantage given their existing technology platform and expertise in high volume electronic trading," Citigroup analyst Keith Horowitz said.
"Standardized central clearing of OTC derivatives are likely to force a major electronification of derivatives trading, which may play to Goldman's advantage given their existing technology platform and expertise in high volume electronic trading," Citigroup analyst Keith Horowitz said.
