by Tyler Cowen
on April 19, 2009 at 12:51 pm
1. Rhabarberbarbara, via Michael Martin.
2. Least Valuable Player, by Bill Simmons.
3. Smart slime molds.
4. The Infinite Loan Machine; reminds me of Fischer Black.
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.
A number of first-world banking systems have no reserve requirement. So was securitization transforming the U.S into just another Anglophone country?
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.
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.
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.
The Nabokov novel ( the one ordered to be destroyed) will be published
This is a very weird thread.
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