pacalis

Volcker's Wake Up Call: Spread the Word

1. “[Financial engineering] moves around the rents in the financial system, but not only this, as it seems to have vastly increased them.”
2. “I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy”

I agree with the moving around rents and lack of productivity, the main points. But if rents have vastly increased, by definition productivity must also have increased, everything else (outputs/inputs) being equal. Otherwise there is an argument that financial engineering has increased the scales of inputs and outputs (productivity fixed) thus leading to rent increases, but this is not what I think he was saying, is it?

Or does he mean the variability of rents has increased?

Is Dubai's Default a Black Swan Event?

Dubai is the poster child of the unsustainable.

PS If you buy 4 nights at the grand millennium hotel this week you can get complimentary ski tickets. Enjoy!

Real Cause of This Financial Crisis? Global Hunger for Savings Instruments

I think this is a nice re-framing of the problem. A big question in all of this is why did people buy all this mortgage backed s$#t. If there was no demand, these mortgage products wouldn't have sold and banks would have been forced to hold the debt of the mortgages they made rather than skimming fees of the transactions. If the banks held the debt, like the did in Canada, you can be damned sure that (1) less mortgages would be given out, and (2) that the quality of the average mortgage would be much much higher.


On Oct 22 07:34 AM a fat panda wrote:

> Great. We have an article about how many how many explanations there
> are, and we get 3 more.
>
> Guys, It is consumer debt that caused the problems. Consumer debt
> enable people to pull demand forward creating the revenues that made
> the whole thing look reasonable. The low interest rates let people
> consume hamburgers today for 2 on Friday. Only it wasn't hamburgers.
> It was cars, and houses, and TVs.
>
> That is layer one. In the next layer, the TV manufacturers became
> 'rich' selling future demand today. The workers wanted more pay
> so we set pensions at 8.5% discount rates so that we wouldn't have
> to fund them. At one point, America had something like 9% of the
> population was millionaires, all selling tomorrows demand today.
>
>
> It wasn't just housing that had a bubble. American expectations
> were in the greatest bubble in history.

Five Reasons the Market Could Crash This Fall

All this doom and gloom.... My view is that recent bullish trends are grounded in the simple recognition that boomers are simply getting way more productive. Profits are down because of fantastic wage increases and incentive-based profit sharing. And unemployment figures just represent the number of loafers on longer term holidays. No worries! :)