A letter signed by over 250 economists opposing restrictions on capital controls is more of a shot across the bow than it might appear to be. The letter with signatories appears here, and it includes highly respected trade and development economists like Ricardo Hausmann, Dani Rodrik, Joe Stiglitz, and Arvind Subramanian; we are reproducing the text below:
Read more...By Satyajit Das, the author of “Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives.” Cross posted from Wilmott
A question of values …
Derivative contracts are valued on a mark-to-market (“MtM”) basis. This requires valuation of the contracts based on the current market price.
OTC derivatives trade privately. Market prices for specific transactions are not directly available. This means current valuations rely on pricing models.
There are significant differences in the complexity of the models and the ability to verify and calibrate inputs. More complex products used sophisticated financial models, often derived from science or statistical methodology. There are frequently differences in choice, exact factorisation and even numerical implementation of the models. Different dealers may use different models.
Some required inputs for the models are available from markets sources. The nature of the OTC market and the limited trading in certain instruments mean that key input parameters must frequently be “estimated” or “bootstrapped” from available data. In certain products, the limited number of active dealers means that “market” prices are sometimes no more than the dealer’s own quote being fed back after being collated and “scrubbed” by an external data provider. This is referred to prosaically as “mark-to-myself”.
Read more...And no … allowing democracy in the Middle East will not increase terrorism.
Read more...Disaster brewing as cyclone stalks Queensland ABC (hat tip reader Skippy). This looks like a BAAAD one.
Super Bowl losses can increase cardiac death PhysOrg
Google would (just) beat Bing at Jeopardy! TechBlorge (hat tip reader Sugar Hush)
House Republicans aim to redefine rape to limit abortion coverage RawStory
Read more...By Tom Adams, an attorney and former monoline executive, and Yves Smith
In common with other accounts of the financial crisis, the Financial Crisis Inquiry Commission report notes that mortgage underwriting standards were abandoned, allowing many more loans to be made. It blames the regulators for not standing pat while this occurred. However, the report fails to ask, let alone answer, why standards were abandoned.
In our view, blaming the regulators is a weak argument.
A much more sensible explanation can be found by asking: what were the financial incentives for such poorly underwritten loans? Why would “the market” want bad loans?
All the report offers as explanation is that the “machine” drove it or “investors” wanted these loans. This is lazy and fails to illuminate anything, particularly when there are other red flags in the report, such as numerous mortgage market participants pointing to growing problems starting as early as 2003. Signs of recklessness were more visible in 2004 and 2005, to the point were Sabeth Siddique of the Federal Reserve Board, who conducted a survey of mortgage loan quality in late 2005, found the results to be “very alarming”.
So why, with the trouble obvious in the 2005 time frame, did the market create even worse loans in late 2005 through the beginning of the meltdown, in mid 2007, even as demand for better mortgage loans was waning?
Read more...I must note that per the New York Times, the memo appears to have gone out that Mubrak no longer has US support, but that is a very long way from saying that the US is in favor of uncontrolled outcomes, despite the sudden adoption of “pro democracy” spin:
Read more...Even though this example involves only three judges in Ohio, don’t underestimate its significance. The fact that judges of their own initiative have started insisting that all attorneys provide certifications of foreclosure-related documents, a standard now in effect in New York state, shows how much their credibility has fallen.
From the Columbus Dispatch (hat tip reader Lisa Epstein):
Read more...This e-mail to Congressional staffers speaks for itself. I am probably being far too nice by omitting the RSVP details. However, I must note the ethics rules for Congress are more lax than those of some private sector companies. I had one client, a Fortune 25 company, that forbade all employees from taking gifts or entertainment of any kind from vendors, down to a cup of coffee. And that’s not as nuts as it sounds. Research by social psychologist Robert Cialdini verifies that a gift as small as a can of soda predisposes the recipient to a sales pitch.
From: The Financial Services Roundtable
Read more...The War on Terror was supposed to be about bringing democracy to the Middle East, among other things … wasn’t it?
Read more...By John Bougearel, author of Riding the Storm Out and Director of Financial and Equity Research for Structural Logic
A decade ago, the Bureau of Labor Statistics predicted that the U.S. economy would create nearly 22 million net jobs in the 2000s.
Obama said with the benefit of his stimulus measures, the US economy would create three million jobs in 2010. The actual number of jobs created in 2011 was 1.12 million (before final benchmark revisions). Now, the CBO is projecting 2.5 million jobs will be created annually from 2011 to 2015.
Faith in the US gov’t’s ability to create 2.5 million jobs for the next 5 yrs (one of the several silly and preposterous CBO projections) is sorely misplaced. The CBO has sugarplums dancing in their heads. Their 2011-2016 forecast for the US jobs market is disingenuous, misleading poppycock.
Read more...Lake Vostok drilling in Antarctic ‘running out of time’ BBC. Why do I think “Andromeda Strain” when I read this?
Genghis Khan the GREEN: Invader killed so many people that carbon levels plummeted Daily Mail (hat tip reader May S)
Bats in Borneo roost in carnivorous pitcher plants BBC (hat tip reader John M)
Internet ‘Kill Switch’ Legislation Back in Play Wired
Read more...Multiple reports are coming in which make that claim.
Read more...Michael Pettis has released one of his carefully reasoned posts, this one on the dark art of guesstimating what China’s GDP really is, given the notorious unreliability of its official data.
The strength of Pettis’ approach sometimes works to his advantage. He does a great job in breaking down his arguments to clear, easy to understand, step-by-step reasoning. That tends to make his posts pretty long. In this case, that meant that the part I though was most provocative came towards the end, when impatient readers might have figured they had gotten the drift of his gist and moved on.
In this one, he starts with the last GDP release, and in particular, the implications the fact that its alarmingly high investment rate continues to increase at a stunning clip. But he then turns to the rather tiresome debate as to when China’s economy will overtake that of the US, and discusses the possibility that the GDP figures touted now could well be overstated by a considerable degree:
Read more...Study shows canid is ‘wolf in jackal’s clothing’ BBC (hat tip reader John M)
Ayn Rand Railed Against Government Benefits, But Grabbed Social Security and Medicare When She Needed Them AlterNet (hat tip reader furzy mouse)
Cairo in near-anarchy as protesters push to oust president Washington Post
Egypt protests: America’s secret backing for rebel leaders behind uprising Telegraph (hat tip reader Andrew U)
US Continues to Back Egyptian Dictatorship in the Face of Pro-Democracy Uprising TruthOut (hat tip Marshall Auerback)
Read more...I often enjoy Joe Nocera’s take on Wall Street, but like some other well known financial writers, he has become overly close to his subjects. No where is this more evident than in a stunning little aside in an otherwise not bad piece on the Financial Crisis Inquiry Commision’s report, which points out that it is long on potentially helpful detail, short on analysis.
Here is the offending section:
Read more...But I wonder. Had there been a Dutch Tulip Inquiry Commission nearly four centuries ago, it would no doubt have found tulip salesmen who fraudulently persuaded people to borrow money they could never pay back to buy tulips.
