Category Archives: Dubious statistics

Guest post: Economic recovery and the perverse math of GDP reporting

Submitted by Edward Harrison of the site Credit Writedowns Now that everyone is talking about green shoots and the potential for economic recovery, I thought I would run through the statistics of U.S. GDP with you. The reason I am bringing this up is that there is a lot of confusion about what recovery means […]

Your Humble Blogger Had a Naive Moment

Even though I pride myself on being a constitutional cynic, truth be told even I harbor a wee bit of optimism. For instance, even thought I regularly write about how Things Are Going to Hell, Fast, I privately assume I am a pessimist and maybe a bit of a crank too, so things might not […]

Alan Greenspan’s Disingenuous Financial Times Comment

Alan Greenspan had a brief moment when he seemed capable of being redeemed, when he admitted before Congress that he was wrong about his assumptions that firms could regulate themselves. I have yet to see another central figure in the banking meltdown admit error. But he has now gone back to trying to salvage burnish […]

Cautionary Tales: Central Bank Liquidity Injections Made Crises Worse in Latin America

Although the Fed has resorted to increasingly unconventional approaches for combatting our financial crisis, one it has used that is widely endorsed is the generous provision of liquidity. Luis I. Jácome H. in a VoxEU post, contends that the liberal use of central bank liquidity to stanch crises actually increased instability. One issue that will […]

GDP Release Signals Further Decline into Banana Republic Status

Last year, we put America on Banana Republic watch, and sadly, things appear to be playing out as we feared: I’m certain you’re familiar with the expression “death wish.” I am beginning to wonder whether America has a banana republic wish. The country has been taking steps towards being a small-minded, elite-dominated, sham democracy. Mind […]

CBO Comes Close to Saying It Made Up That $25 Billion Freddie, Fannie Rescue Cost Estimate

Readers may have seen that we cast aspersions on the CBO’s estimate that the Fannie and Freddie rescue program would “probably” cost taxpayers $25 billion. We had noted that the estimate was only through 2009 because that’s how far the authorization extends, but there is no way that Fannie and Freddie will ever be cut […]

"The End of the World as We Know It?"

In a TheStreet.com($) story with the above headline (hat tip reader MIchael), Doug Kass noted that the price increase in the Financial Select Sector SPDR was 13%, an 11 standard deviation event. According to Kass, the odds of an eleven standard deviation event is equivalent to the world ending – between three and four times. […]

Taleb’s Harsh Assessment of Bankers, Economists, and the Fed

Reader Michael called to my attention a wide-ranging interview with Nassim Nicholas Taleb, author of the Black Swan and professional iconoclast, in the Times of London. The article is colorful, wide-ranging, and a bit long, so I’ve excerpted some of the most provocative bits. Needless to say, I am particularly taken by his dim view […]

"Blame the Models"

One of our pet interests has been how the use of mathematics and models can unwittingly enable people to fool themselves. We see this regularly when working on deals. The model for the target business’ performance somehow becomes more real than the company. When the numbers don’t work, if you can come up with a […]

Does Measuring Service Productivity Lead Us Astray?

In “Japan may be rigid but it is not inefficient,” David Philig takes issue with metrics that find Japan’s service economy to be woefully inefficient. The commonly used yardstick is labor productivity, and Japan allegedly scores badly due to its tendency to have high staff ratios (for instance, those ladies in hotels who walk you […]

Stressed Banks Underreporting Libor Rates

The Wall Street Journal reports on another sign of how bad the credit crunch has gotten: banks fudging on what they are reporting as their short-term cost of interbank borrowing, out of fear of revealing how stressed they are. So the Libor becomes less useful as a guide. That in turn means that the so-called […]

Quelle Surprise! Unemployment Stats Don’t Capture Joblessness

The New York Times has finally deigned to report on the fact that the Bureau of Labor’s unemployment rate (aka “headline unemployment”) does an incomplete job of capturing the proportion of the population out of work. The article by Floyd Norris, “Many More Are Jobless Than Are Unemployed,” is less than complete. Despite its professed […]

"Is US Inflation at 8%?"

Wolfgang Munchau, who writes for the Financial Times as well as the blog Eurointelligence, ruminates about inflation statistics and argues that economists and statisticians may be going down the wrong path in dismissing consumers’ subjective perceptions. He also has considerable doubts about hedonic adjustments (basically, the methodology for adjusting for the fact that computers and […]

"Financial Models Should Come With Health Warnings"

All About Alpha, which is a fine site for all things hedge fund related, has an excellent piece today by Dr. William Shadwick of Omega Analysis. Shadwick has the unusual distinction of being a serious mathematician (he established Fields Institute for Research in Mathematical Sciences) who writes well. He also entered the finance industry relatively […]

Credit Swaps Feedback Loops Raising Corporate Borrowing Costs

An article in Bloomberg, “Credit Swaps Thwart Fed’s Ease as Debt Costs Surge ,” focuses on a noteworthy phenomenon, but does a lousy job of explaining it. I’m posting it nevertheless in the hopes that a reader in the relevant markets might shed some light. The story tells us that corporate borrowers, even AAA ones […]