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Assorted links
1. Rhabarberbarbara, via Michael Martin.
2. Least Valuable Player, by Bill Simmons.
4. The Infinite Loan Machine; reminds me of Fischer Black.
Posted by Tyler Cowen on April 19, 2009 at 12:51 PM in Web/Tech | Permalink
Comments
reading infinite loan machine it sounds like the ability of some entities to make sell CDS protection without posting collateral or posting very little collateral was part of the problem. the money markets needed risk free returns and CDS writers were able to create them.
being able to write CDS protection by posting very little collateral is basically free money assuming the underlying bonds are priced correctly. the CDS writer has a long bond position which is effectively borrowed for at the risk free rate. it isn't surprising that companies like AIG arbitraged their credit ratings.
Posted by: drscroogemcduck at Apr 19, 2009 2:48:29 PM
So my German isn't what it used to be--and even at it's peak, I probably couldn't have understood all of it--but was that first link making fun of how the German language just randomly mushes words together to make a new compound, often resulting in something monstrous and unwieldy?
Posted by: John W. Payne at Apr 19, 2009 2:51:38 PM
A number of first-world banking systems have no reserve requirement. So was securitization transforming the U.S into just another Anglophone country?
Posted by: TGGP at Apr 19, 2009 4:29:32 PM
Slime molds!! But Rhabarberbarbara is nice too.
Posted by: IWantCookieNow at Apr 19, 2009 4:43:11 PM
J. Payne,
Rhabarberbarbera is mainly just a very impressive recitation of a difficult tongue twister. The meaning is fairly well represented by the pictures. Everyone either enjoys or assists in the production of a kind of Rhubarb pie. But as a tongue twister, it's not really making fun of the German language any more than the phrase "the sixth sheik's sixth sheep's sick" is making fun of English.
Posted by: William at Apr 19, 2009 5:00:55 PM
It is a step in the right direction to focus on NON BANK lending. All this focus on banks ignores the fact that the real issue is in the lend to distribute model. We can regulate the hell out of banks and still not touch this area.
Anything that tries to control banks without addressing securitized lending is doomed to irrelevancy. Or even worse -- further weaken banks vis a vis non bank competition.
Maybe the fact that this seems to be continually glossed over means that it is more or less hopeless.
Posted by: Cap Vandal at Apr 19, 2009 7:45:51 PM
Reminds me of Black as well. The problem is separating the stuff he wrote that was crazy from the stuff he wrote that was brilliant, a la Mehrling.
Posted by: Jfalk at Apr 19, 2009 8:52:27 PM
Have you seen this article?
http://www.theatlantic.com/doc/200905/imf-advice
Posted by: Desiree at Apr 19, 2009 9:46:14 PM
What's wrong with just worrying about the banks that pose systemic risks that are going bankrupt? If the already regulated big banks and insurance companies weren't in trouble, we wouldn't have this problem.
The problems were: 1) thinking you owned AAA securities when you didn't. 2) Global savings glut chasing yield and (supposed) safety and finding it in US real-estate 3) A housing bubble caused by this credit explosion 4) Broken models that encouraged leveraging up these "safe" assets. 5) The difficulties of renegotiating mortgages once all of them got in trouble - if you treat a bundle of mortgages like one mortgage, when a large number get in trouble they need to be renegotiated.
We had the Fed raising interest rates. The banking sector is regulated. I don't see how regulations (as currently couched) prevent these problems. We need smarter investors. Better judgment comes from experience, and experience comes from bad judgment.
Posted by: Andrew at Apr 20, 2009 3:29:52 AM
Octopuses are proven to have very high level of problem solving skills. IMHO, except for tasting great after being cooked, octopuses are not that different from slime molds.
Posted by: Yan at Apr 20, 2009 7:16:56 AM
The Nabokov novel ( the one ordered to be destroyed) will be published
Posted by: k at Apr 20, 2009 8:17:02 AM
Slime molds are very different from octopuses. A slime mold is not an organism -- it's a collection of individual cells that only occasionally act together. See here -- when food runs out and the cells can no longer survive as individuals, only then do they coalesce into a slime mold that can travel or form itself into a spore. The evolutionary logic that allows them to cooperate instead of cheating are quite interesting.
Posted by: Noumenon at Apr 20, 2009 11:22:16 AM
This is a very weird thread.
Posted by: MattF at Apr 20, 2009 4:24:15 PM
Slime molds!! But Rhabarberbarbara is nice too.
Posted by: KDS Laptop Battery at May 18, 2009 10:41:41 AM
