naked capitalism Mon 2009-12-28 17:16 EST

Guest Post: Princeton Economist and Computer Scientists Show that Derivatives Are Inherently Vulnerable to Fraud

Washington's Blog

...the main default risk model for credit default swaps -- the ``Gaussian copula function'' -- was inherently flawed. Now, Princeton University economists and computer scientists have demonstrated that financial derivatives are also inherently vulnerable to fraudulent pricing. PhysOrg summarizes Princeton's findings: ...sellers of these investments could purposefully include pieces of bad risk that no buyer could detect even with the most powerful computers... the problem arises from asymmetric information between buyers and sellers, and goes against conventional wisdom in economic theory, which holds that derivatives reduce the negative effects of such unequal information.

Computer Scientists Show; derivative; fraud; Guest Post; inherently vulnerable; naked capitalism; Princeton economists.

zero hedge Sat 2009-10-10 14:13 EDT

Albert Edwards On The Upcoming Economic "Abyss"

As always, Albert Edwards provides a solid dose of economic observations based on facts, not hope...unless you truly believe that the stock market is its own isolated bubble, which many do, at some point cash from assets will have to support equity and debt valuations. And once the government cash funding vacuum pops, the market-economy divergence will also collapse. At that point, every dollar used by the government via stimulus and Federal Reserve pumps will have an equal and opposite effect on stocks, thereby throwing America not just into a debt funding crisis, but a complete economic and capital market tailspin. Alas, it appears impossible to prevent this, as the administration and the Federal Reserve Chairman are dead set on executing their inherently flawed experiment...and the American middle class.

abyss; Albert Edwards; upcoming economic; Zero Hedge.

Thu 2009-07-30 00:00 EDT

Will The Dollar Standard Collapse?

By John Carney; Sahm Adrangi opines ``Abandoning the gold standard has gradually resulted in a very overvalued US dollar, and that the dollar is headed for disaster. The dollar standard is inherently flawed and increasingly unstable. Its collapse will be the most important economic event of the 21st century.

Dollar Standard Collapse.