dimelab dimelab: shrinking the gap between talk and action.

Sight Topic in The Credit Debacle Catalog

Elvis Sightings (2); lost sight (3); short-sighted (1); sight forever (1); useful sighting (1).

Sat 2010-10-09 10:56 EDT

And Then There Were None | afoe | A Fistful of Euros | European Opinion

...rather than being over, what the debt crisis now may be entering is a new stage, where one sovereign bond after another is being chisled out and sent off to join their Greek counterpart in the isolation ward...the Irish economy has never really left recession...Irish GDP has now contracted on a quarterly basis for 9 out of the past 10 quarters, and there is no evident end in sight....the riskiest lenders to nationalized Anglo Irish Bank may not get all their money back...In the Portuguese case it is the budget deficit issue which is unsettling the markets, with the spread widening sharply following the revelation that far from the deficit being reduced is was actually increasing...Neither the European sovereign debt crisis nor the banking sector crisis has been resolved and both continue to mutually reinforce each other...the EU's stress tests for banks had manifestly failed to restore the necessary confidence.

afo; euro; European opinion; fisted.

naked capitalism Fri 2010-10-08 22:09 EDT

Doubts About Eurobailouts Come to the Fore

A brief recap of a couple of useful sighting on the ``rising anxieties in Europe'' front. Edward Hugh has a very thorough update (bond spread trends, underlying drivers, an astute discussion of politics) leavened by a great deal of wry humor ...Wolfgang Munchau at the Financial Times takes a hard look at a piece of the puzzle most have avoided, namely the CDO structure that the Eurozone members used for their €440 billion bailout fund. He's pushed some numbers around, and as far as he can tell, it will only be able to offer costly funding, and in much smaller amounts than advertised...

doubt; Eurobailouts Come; fore; naked capitalism.

billy blog Mon 2010-06-07 19:00 EDT

Central bank independence -- another faux agenda

There are several strands to the mainstream neo-liberal attack on government macroeconomic policy activism. They get recycled regularly. ...Today, I am looking at another faux agenda -- the demand that central banks should be independent of the political process...The agenda is also tied in with the growing demand for fiscal rules which will further undermine public purpose in policy...I find it ironical that the freedom mongers have very limited appreciation of what freedom actually is. Allowing the unemployed to be ``bullied'' by amorphous bond markets is not a path to freedom...inflation targeting countries have failed to achieve superior outcomes in terms of output growth, inflation variability and output variability; moreover there is no evidence that inflation targeting has reduced inflation persistence...Central banks operating under this charter have forced the unemployed to engage in an involuntary fight against inflation and the fiscal authorities have further worsened the situation with complementary austerity...The conclusion that I have reached from studying this specific literature for many years is that there is no robust relationship between making the central bank independent and the performance of inflation...From a MMT perspective, the concept of CBI is anathema to the goal of aggregate policy (monetary and fiscal) to advance public purpose. By obsessing about inflation control, central banking has lost sight of what the purpose of policy is about...under the CBI ideology, monetary policy is not focused on advancing public purpose. Fighting inflation with unemployment is not advancing public purpose. The costs of inflation are much lower than the costs of unemployment. The mainstream fudge this by invoking their belief in the NAIRU which assumes these real sacrifices away in the ``long-run''...

Billy Blog; Central bank independence; faux agenda.

Mish's Global Economic Trend Analysis Mon 2009-10-12 09:22 EDT

One Hand Clapping Theory Analyzed

Numerous people have asked me to comment on Chris Martenson's article The Sound of One Hand Clapping - What Deflationists May Be Missing. Chris Writes: ...``Trillions in probable and provable losses quietly exist, out of sight, on the balance sheets of the Federal Reserve and other financial institutions. If they ever come out of hiding and onto the books, I think the deflationists will be proven correct beyond all doubt. But let me ask this: What prevents the authorities from simply storing them out of sight forever?...I am now wondering if they cannot keep this up indefinitely.'' ...In a credit based economy, the odds of a sustainable rebound without bank credit expanding, and consumers participating is not very good. Even if one mistakenly assumes that the recent rally is a result of pretending, should we count on sustained success now more so than a measurement of stock prices in April of 1930, or any of Japans' four 50% rallies? I think not. Pretending cannot accomplish much other than prolonging the agony for decades. This is the message of Japan. Moreover, the US is arguably is worse shape than Japan because our problems are unsustainable consumer debt, high unemployment, and massive retail sector overcapacity. Those are structural problems that no amount of pretending in the world can possibly cure. In due time, the market will focus on those problems.

hand clapping theory analyzed; Mish's Global Economic Trend Analysis.

The IRA Analyst Sun 2009-09-13 12:14 EDT

House Testimony: The Trouble With Models Starts With Subjectivity

...we have now many examples where a model or the pretense of a model was used as a vehicle for creating risk and hiding it. More important, however, is the role of financial models for creating opportunities for deliberate acts of securities fraud..the widespread use of [VaR] statistical models for risk management suggest that financial institutions are subject to occasional "Black Swans" in the form of risk events that cannot be anticipated...We don't actually believe there is such a thing as a "Black Swan."...leaders in finance and politics simply made the mistake of, again, believing in what were in fact flawed models...Or worse, our leaders in Washington and on Wall Street decided to be short sighted and not care about the inevitable debacle...We need to simply ensure that all of the financial instruments in our marketplace have an objective basis, including a visible, cash basis market that is visible to all market participants. If investors cannot price a security without reference to subjective models, then the security should be banned from the US markets as a matter of law and regulation. To do otherwise is to adopt deception as the public policy goal of the US when it comes to financial markets regulation.

House testimony; IRA Analyst; models starting; subject; Troubles.

Wed 2008-12-10 00:00 EST

naked capitalism: Finance Has Lost Sight of Its Role

finance; lost sight; naked capitalism; role.

Tue 2008-11-25 00:00 EST

naked capitalism: Finance Has Lost Sight of Its Role

finance; lost sight; naked capitalism; role.

Tue 2007-11-20 00:00 EST

naked capitalism: Another Sighting of a Sensible Markets Reform Proposal

Stephen Cecchetti suggests standardized securities, exchange-based trading

naked capitalism; Sensible Markets Reform Proposal; Sight.

Tue 2007-08-28 00:00 EDT

Winter (Economic & Market) Watch >> Elvis Sightings & Loose Lips Sinks Ships

Winter (Economic & Market) Watch >> Elvis Sightings & Loose Lips Sinks Ships, by Russ Winter; Fed constrained by foreign ownership of US debt

economic; Elvis Sightings; loose lips sink ships; Market; watch; winter.