Sunday, June 23, 2013

Central Banks and Addiction

Moral: Wherein we let some particular events of the past week (irrational fear of the taper) motivate a few thoughts; too, Romain Hatchuel has a nice review in the 06/21/2013 WSJ that is worth attention.


First, what happened? Ben let up with his silly promises (so to speak); or, if we look at it correctly, Ben just talked the truth. What people read into it tells us a lot.

As said here before, the training wheels need to come off some time or another. Too, Ben and his ilk ought to consider savers who have been slapped silly for the past few years. Why? Ben, and his kind, have some type of debt infatuation. Gosh, PhDs, and other brains, are pushing this type of viewpoint?

Addicts would sell their mothers down the river. The whole thing of the past few years has been very much analogous to some type of unstable thinking related to overuse of substances (in this case, Ben's largess).


Aside: It's not Ben's fault, entirely (after all, the role of the pusher seems to be a consistent factor in human affairs -- so why not finance, too?); except, he seems to be trying to outdo King Alan as the chimera's main face (Ben, the wizard?).


So, as we've said before, let's go back to the basics, please. The whole regimen of Ben's pretty face out there with everyone trying to read something into his communications (verbal and non) is more than plain silly. It's stupid, folks. A proper view would demonstrate why this is so.

I know, how long will it take to get this defined? You see, the addicts want their daily fix. Some cannot live with just the five-day workweek. No, they have to use the other two days, as well, for their gaming.

Ever heard of a sandbox? This gaming type of mind would best be situated in such a thing. You know, sandboxes can be used by "children" for play. Too, though, consider how cats use sandboxes. Yes, those who need such could crap all they want. Then, they could clean up after themselves (unlike this past downturn where we had to clean up the crap from these people - diaper change, essentially).

The adults would run the financial community (Harvard, where are you on this matter? Or, are you in the class of trying to make the fast buck to the detriment of all but those in your class?) with the sandbox isolating the serious gaming minds. Would we learn anything from such play?


Now, finally, to Romain's article. He is a manager partner of Square Advisors, LLC that is based in New York. The firm deals with asset management. That focus implies his interest.

So, what did Romain write that struck a chord? Well, he writes, for one, that investors have been acting like "a bunch of junkies" using whatever "crack" is being pushed by financial markets. Behind all of this is the dealer with whom we are all familiar (who? Ben, of course). So, Ben just lets a glimmer out that he's limiting the supply, and those who are using his stuff go bananas.

Later, Romain goes into how addicts are drawn to their favorite substance and why. You have to love this little bit of analogy.

Now, after that, Romain compares the period of '50-'80 and from '80 to '10. You see, I am very much familiar with those eras as they correspond to my adult work life. And, from that perspective, I see that the financial world has gone bonkers. Look, since the downturn started, I've been looking to see where things have gone awry. It's simple, folks. As this blog has been trying to detail, albeit in a, probably too mocking, manner.


Aside: Academic work touched upon finance, from an economic perspective. Frankly, it didn't look interesting. Later, I heard that armies of youth were heading that way. Why? In retrospect, it was inevitable, given how technology evolved, that finance morphed. Too, though, the whole motivation for truth engineering has a lot in common with the embedded error-ful ways (we'll have to get back to this).


Romain's words resonate many ways, but we'll hold that for later. Let's just continue. You see, before '80, the debt to GDP ratio was small. Now, this is more than at the National level. You have to know that it deals with the personal debt, too. Romain says that in the 30-year period, to '80, the GDT grew 191% while debt grew only by 12%.

Now, after '80 (please, note, this is when the upturn of things like the DOW start -- sheer madness, when looked at properly, hint: near zero -- look it up in this blog, okay?), for the next 30 years, the GDP and the debt went up about the same.

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Aside: Ben, you might think that lowering the rate would help those in debt. But, many could not redo their loans. Note, too, guy, that many of the larger pockets got their debt forgiven (what? you're doing the 7-year thing that we saw in Leviticus? Actually, Romain, I would go further and say that rather than "junkies" which is pejorative, somewhat, what we have are immature ones who expect others to take care of them. There are several ways to characterize this, but "sugar daddy" comes to mind. That is, at some point, we seem to want someone else to pay. Where are the mature minds who will realize this? By the way, don't politicos always have their hands out - like takers?

Aside: Despite these immature takers, we do have those who give. Take the enlisted class in the military who give their all without sufficient reward. Not talking the O-class, who consider themselves, by the Grace of God (I suppose), as better. We, as a nation, have asked for supreme sacrifices from the few over the time periods mentioned in this post. At the same time, we've spawned many big pocketeers who never performed in any type of national service. ... There are many other types of givers. Actually, the whole economy rests upon those many (even though most of the attention is given to the fat-cat errants - the times) who have been striving despite difficulties to perform roles of substance. ... By the way, did you hear about Goodwill managers making 100Ks of bucks while paying some workers cents (yes, cents -- by the way, I was paid, in the 1959 timeframe, less than a dollar an hour for performing the duties of a hospital orderly - my senior year in high school - that was 1/2 a century ago -- this is 2013!) per hour?


Yes, debt is borrowing from the future (Romain sees this as do a lot of others). ... Too, the whole talk of liquidity is a game being played (and they're using phony mathematics as the basis for the argument) out by those who want to take the cream off the top -- ill-begotten gains, for one).

Look, some one trolling to find suckers is not adding to market value. Consider, do we let the legal authorities entrap? Yet, we let the financial idiots to this as if they're great brains. Gosh, folks, how did this madness come to be? Financial schools (yes, academia) need to step up as some type of authority. Oh, Ben is from such? What was his problem (besides trying to control a gigantic system with incorrect knobs)?

Romain quotes Krugman on austerity (see Wiki for a good discussion). Of course, Krugman stresses liquidity's usefulness (which we can show is mainly used by insiders to tweak the system in order to enhance their gain potential). Does Krugman consider that we've hocked our progeny's future?


The debate will continue. Romain seems to rue opportunity lost.

Well, reading the article got me to thinking about the times of six years ago (see 7oops7, when the first glimmers of idiocy stated to peek around all attempts to keep the public in an unaware mode). When things started to tumble, there was more discussion of things like moral hazards, and such. Of late, it's like the whole game is Ben and his largess and the resulting frothing of the markets.

What does it mean to a saver to have the DOW soaring when the banks slap you silly? Yes, they want you to get into equities, too (as in BofA trying to gain from taking over ML -- yes, nauseating, somewhat).

Aside: Tranche or not - This was the first post related to finance. You see, after the glimmers started, I got back to work trying to see what had happened in the financial world (I had worked in applied engineering - real products) that was so unstable. The whole notion behind tranching struck me as being like looking for perpetual motion (yes, indeed). Finance deals with the abstract and has become more divorced from reality through time. Most of the market activity daily is pure crap, meant mainly to churn and to generate fees. Why this became more problematic in the latter part of the 1900s is due to computation's ubiquitous-ness, in part.


09/17/2014 -- Yes, she did. The coo-coo, goo-goo goes on. The landscape is strewn with the lifeless bodies of the savers. Thanks, Janet.

12/05/2013 -- If only Ben would put a shot across the bow.

08/15/2013 -- FED siteFEDofNYPre-FOMC Announcement "drift"

08/05/2013 -- Let's see. Financial Engineering needs some attention. Perhaps, with the likes of MIT involved, this discipline can learn to lead the way out of the morass. Expect more on this topic. If things continue as they are, markets will be pure chimera (as in, ca-pital-sinos). Investors? We'll go on about that, too. It's guaranteed that most in the equity markets will lose. Why is that not talked about by those heads we see daily yakking on TV and newer media? No, they would rather go gaga (apologies to the Lady). So, we'll have to address this issue: the point (price) at which loss outweighs any gains to date. All cannot sell to make a profit. Now, there is a way that all could sell high (government as the buyer of last resort - Ben has been doing this, albeit with bonds - yet, it frees up money that can go to equities -- government? of course, taxpayers). We'll have to look at the misuse of mathematics; plus, doers need to be brought back to a respectful position.

07/12/2013 -- Will wonders never cease? Jon knocks early-lookers?

07/11/2013 -- Wherein we consider that Ben is entrapped by the expectations of the addicts. Too, this warps his view; except, he started to slap the savers early; now, he's torturing them (Guess what? Some nominee for a position admits that water boarding is torture. Ben has been doing worse than that to savers.).

06/27/2013 -- Plenty of talking has been done by several of Ben's buddies (of both genders). Now that the markets show that they have legs (or can, at least, stand?), perhaps, the thing would be to go cold turkey. Or, either quit the latest QE or raise the interest so that savers can start to heal their faces that have been slapped so many times that their skin is in worse shape than it would have been if they had undergone lashes across the face (yes, Ben, and his ilk, need to think of that part of the equation, too). With lashes, one knows when it (the ordeal) ends.

06/25/2013 -- Ben doesn't have to talk goo-goo. No, his hawks can do that. Today, the MN guy saying that they need to continue accommodation due to financial crises. Sheesh. Crises? When do they ever end? And, what about accommodating savers? Those who sold were the ones in early making "gains" almost beyond bound. It would be nice to have quiescence once to do an accounting (about as much a pipe dream - several reasons - as it is for someone on the Fed to argue for the little savers).

06/24/2013 -- The convulsions of DT continue. When, and how, can health be restored? Ben, do you think of that or do you just like to tip toe before the fat cats of Wall Street?

06/23/2013 -- As we expand the cosmology of business series, we'll get more into why mathematics and computation have led things astray (you'll hear it here, first).

06/22/2013 -- WSJ editorial: Central banks can't keep floating the world economy forever, and our view is the sooner the withdrawal begins the better. But as with all addictions, the withdrawal is going to be volatile.

Modified: 09/17/2014

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