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Of course, the Fed had a choice: take over the banks and make them solvent (and liquid) or take over AIG, which had insured the banks, and make them solvent (and liquid). One may agree or disagree with the indirect strategy chosen by the Fed to make the banks solvent (and liquid), but it's not the place for the courts to second guess the strategy adopted by an agency that straddles the executive and legislative branches of government. The only legitimate question is whether the Fed had the authority to do what it did, not whether it was the wisest choice.

Well, the courts were being asked to decide that "legitimate question" you posed. If it isn't their place to answer this, as you first stated, then courts have no reason for being in the first place.

or take over AIG, which had insured the banks,

Insured which banks? To what degree? Banks and securities firms were among those who had bought credit default swaps from AIG. So, who owned which security which was in default?

I agree with just about everything Davies wrote, including that in a default scenario legal tender IOUs would be more likely than explicit Grexit. But there's not really much difference: legal tender IOUs would be a de facto separate currency and would devalue rapidly.

Dan's chart of the primary balance isn't right.

2: if one guy can cause the whole mess to crash, it is fundamentally broken. You would think that the whole thing was put together by uneducated creationists.

Clearly it was put together by top men.

The seem to make a good case for "spoofing" under the new laws -- although what "Spoofing" is going to be decided by a court.

As for causing the flash crash, not at all.

Really, that a day trader can be making 250K a day is a real sign there is no stagnation.....

Why don't they just charge a 50 cents for each canceled order and call it a day.

The CME (where the E-Minis trade) does charge fees per cancelled order when a firm's cancel to execution ratio for the month exceeds a given threshold. Canceled orders per se are not bad. To make liquid low-cost markets, market makers need to be able to adjust the price and size of their liquidity in in response to new information. Spoofing is a bad activity that involves excessive cancellation, but the vast majority of cancellations are the result of liquidity providing.

What's the alternative? These type of events are not specific to modern electronic markets. In August 2007, a single hedge fund liquidating their structured credit portfolio caused the hundred billion dollar CDO market to fall by more than 50% in a week. And that market is completely traded by humans negotiating prices over the phones, about as far away from the electronic HFT structure as is possible. If you're familiar with chaos theory, then you'll know that complex, non-linear systems can be very robust under a wide-range of conditions, but suddenly de-stabilize due to some very minor change. The butterfly effect, and all that.

This isn't just an issue related to financial markets. Remember in 2003 when 55 million people lost power for an entire evening due to a 5-line software bug on a single computer. Building complex, distributed systems that need to be completely robust under a wide, high-dimensional range of conditions is really difficult.

The whole point of software is to centralise control in this strange document/machine that we call a program. It's no suprise that such things as the blackout occur. Disasters in more genuinely distributed things like ecosystems and markets also occur, but I think they are a different kind of thing.

From Davies:

looking through the local authorities and nationalised industries to try and find enough cash to pay both the IMF and the wage bill.


Looting through (though justified looting in the case of the nationalized industries) is more like it. I think this will continue in July, but with a broader group of the looted.

Why aren't there more private tutors in charge of education? Do people just not know what is possible with early one-on-one education?

Please elaborate?

Why don't people give their kids even more highly privileged individualized educations? Why are they trying to get into highly exclusive kindergartens instead of just hiring a really good babysitter? Hire people to speak to them only in latin etc. Even if you believe academia is in a sad state, seems like you could get a bargain.

In the days before public education private tutoring was frequently the choice before other school options. It really is amazing that the wealthy don't employ tutors, but what it indicates is that the signal of expensive education is more important than the knowledge obtained. Maybe even more important is the student to student networking that can last a lifetime and also the feeling of grandeur that ordinary parents can get by sitting next to some rich parent at a piano recital.

#6 I do hope that Bryan Caplan is right about parenting and schooling.

#4 do people fart audibly when they have ear phones on and listening to loud music?

I wonder, would that be a case of being "less socially anxious" or less socially responsible?

Doesn't anyone draw the conclusion that if traders worked off of their assessments of the values of stocks and not spurious information like momentum and sell pressure, things like the "flash crash" could not happen? Maybe it is illegal to take advantage of these dopes as Mr.Sarao did, but the real fauls seems to lie with the traders he "victimized."

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