Secured payment

Moral: Wherein we just reiterate the chimera theme (as in, if all pulled their monies simultaneously, there would be payouts only to the first few in the line -- vapor, essentially, for the rest).

People, and businesses and governments and unions, cannot run themselves solely on gaming. Oh, I know, the intellectual view of the world says that we're all in this big game (in actuality, a fault of hyper-rationality). Now, of course, that game abstraction might have its usefulness, such as in discussing near-zero (briefly you win, I lose, which has morphed to this: heads, I win; tails, you lose) as the reality, with greed in the game, but it does not come near to the truth of the matter.

Truth? Yes, we'll defer this (remember, all modern arguments, like our debt, gets punted down the road), but every living human knows her/his being (wait! that's not entirely true in some senses, but it is from the sense that we'll expand upon in time -- pause, to nod to a niece's thoughts on Baruch: I feel, therefore I am).

---

Intellectualism has thrown out intuition which is one of our best characteristics, in some senses (pun intended). It ought to be trained and is in special cases. But, we need it to be more generally used (nose to smart device is not it, folks). The role of intuition (think nose - so that we can smell rats and crap and such) has been subsumed under a mathematical cloak that leads us only to perdition-laden paths that are associated with uncontrolled, and uncontrollable, computational states (in the many senses, to boot).

---

Anyway, we need some speculation as the limit of prediction. But, forecasting can be more robust than not. In terms of money (finance), we need to listen to Minsky's notions.

That is, speculation leads to froth (and the rich pulling off the top), by necessity (we need to understand these phase issues -- which seem to be like the physical types with which we are so familiar). For most of us, we need to know that we can get what we need when we need it, assuming the monies are ours or due (even something deferred from before (see comment on unions, below) -- we need to get the sticky fingers out of the pot, yes fat cats, namely you). And, the other side of that is a sure, small return beats a large uncertain return any time (except for the lucky (very few) who ought not be considered examples to follow, by any means). What did someone at golden sacks say? Paraphrase: I would rather lose my reputation than my money; I can regain the former; the latter is gone (meaning, harder to re-acquire) if I lose it.

---

Speaking of the deferred, such as unions deal with, they ought to have a basis that can be actualized. You see, the fat cats get their take now (we'll explain why ad infinitum). Others hope that they can get their reward as promised (ah, so many issues here). It's something like this, now: promise the moon, but deliver a cow patty.

Pause, again, to reflect on 18K jobs lost. Too, the disappearance of a wonder bread, Nature's Pride.

Union guys/gals, tell me this: Why do your leaders live like the fat cat bosses? They ought to be in the trenches with the membership. Fact is, the bosses ought to be able to do the work that they direct, to boot (see below, about the O-series).

---

Unfortunately, we've put many people into the boat of losing (their all) due to the ignorance (or greed) of others who are not following any notion of duty, fiscal or otherwise, other than to their little selves (I say, draft their asses into the service -- enlisted, not officer -- this is a subject that I'll debate -- all officers ought to spend a significant stint as enlisted prior to their being ordained as the best into the upper class/crust).

The crux, in part? Simple living, for one thing (why is it that General officers think that they are Pharaohs or something similar?). Those whose outflow (as in, outrageous expenditures on their lavish ways) is way beyond anything rational always need to  have a crooked system (with risk in their favor) in order to get their large returns (hence, book cooking, et al). With Kings and bullies, of course, it was taking from the hapless (usually way beyond the person's capability for sustenance - the result, one less peon).

Yes, living within reasonable means is important. For another, no debt unless it's combined with collateral (of a nature that is not froth -- sheesh). There are more, of course.

---

It's crappy, people. Always has been. A mature human race would dampen that idiocy (along with a whole bunch more) which seems to be glorified. We'll get to that as there is more of this than those related to financial matters.

Remarks:

05/22/2013 -- Need to look at the cosmology of business (Remarks this day).

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' as to whether Ben has helped.

11/30/2012 -- Baruch's views can be used to help found the necessary truth engineering framework.

Modified: 05/22/2012

Ben's precipice

Moral: Wherein we consider that Ben can claim a little victory with consequences that will only be known much later.

---

We remember Alan's put and its effects (still being unwound and analyzed). What will we remember of Ben?

---


Watching Bloomberg, with 1/4 attention, saw a momentary flash of a graph. On it, there was a sharp drop being displayed. What was being graphed? Well, it wasn't the coming chasm (or whatever is the label for what is pending coming next January). What was being displayed was the long-term rate for Treasuries.


---

Well, Ben has been after that, for a while. So, does he have a sense of accomplishment? Does he have any qualms about putting a whole set of nails in the coffin of the middle class, and the savers? He's been putting it to the latter for a bunch of years now.

---

As Ben pushes toward the chimera (yes, bulls notwithstanding), things become even more dire for a whole bunch of folks. Who is not in dire straits? Those (some) playing games with the chimera, usually from a position that has plenty of backup (including, ultimately, bailout from the FED -- namely, we the taxpayers).

---

He wants things to be based upon this shaky platform that enriches the few and impoverishes the most. The notion of steady, and stable, seems to have gone with the wind. Yet, each who reaches effective maturity has had more elements of the stable than not. The rich know this (see 21 ways - at Business Insider); some try to keep the proper lessons from being learned by those who are most in need of the insights. Oh, find your own bootstraps is the message to one who doesn't even have boots, or if there are boots, the straps have been stolen.

---

On the 21 ways, it might be interesting to look at these in the context of the blog's viewpoint. Take #17, for instance, where the focus is on earnings versus savings. You see, the chimera, above, is thought of as earnings. Okay. Tell me truthfully, did those who rode on Zuck's coattails really earn anything (as in, what of value did they contribute besides big pockets, being at the right place at the right time, or some other pseudo-contributory role)? Yes, you guys, come explain this taking to us. What ought we call those 'gains' whose influence is mainly gaming that is meant to up the take of those who can (when the time to pull the plug arises) exploit these types of situations? Earnings? Remember, too, these 'gains' (even if very short term in nature) receive preferential tax treatment (thanks, those responsible for this). Ah, we'll have to look at that in more depth. 'earnings' can range from the hardscrabble income (can be characterized by so many examples -- from subsistence upward) to thievery (modern earnings, many times).

Ben, you really know better than to stoke this fire.

Remarks:

03/17/2013 -- The metaphor ought to be rats in the grain bin.

03/05/2013 -- Ben reigns, but the savers' faces are bruised from his slapping.

02/26/2013 -- What? Ben doesn't have any influence with his put?

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

10/24/2012 -- Ben is sticking to his guns. Lucy people like myself will continue to pay through the nose. Thanks, big guy.

09/13/2012 -- So, Ben, backed up by his cronies, is doing QE3. As well, they're talking low rates until mid-2015. Why? So that the casino will continue with its chimera! We're going to end up with savers being sacked for more than 1/2 a decade. Preposterous. The main tale? Those with are doing fine and growing larger. Those without are more dire. In the middle, squeezed. The first class is a small subset, as we all know.

09/08/2012 -- Thanks are owed to Larry for being one of the few who stayed on message.

Modified: 03/05/2013

LIBOR, a big fudge?

Moral: Wherein we consider, again, the ca-pital-sino's financial part's errant ways.

---

Is LIBOR a big lie? Well, it very much exemplifies the problems with finance. Why can't economics and finance be more scientific? It can be, but this will take more than the exploitation of advancements in mathematics and insight for the few (near-zero is real).

In the case of LIBOR, we're not far from the issue of 'mark to myth' (which Congress was told to favor by its financiers). Remember how stringent 'mark to market' seemed to be? Oh, you forgot? Well, the issue was not resolved in the appropriate way.

We'll keep going on about that, perhaps even using mathematical frameworks to lay out the argument. When? Again, hopefully, other than PTIME.

---

The motivations for continuing can be many. What idiocy is uncovered (ah, how can it be stupid, if it puts money into the pockets of the few?) every day? Why can't we find the proper insight to pull in those with power (who think that money defines truth - and smarts) before they crap on us? Surely, if we're to be mature, we'll have leaders who are capable of more than messing their diapers (requiring our cleaning up after them).

---

Let's look at a couple, namely the posts of note the past week or so.

• 201k, 401k, 801k, ... -- October, 2009, in jest, in part. But, note the progression upward toward 25601k. Can you not see that the current model ends with way less than one percent with the moolah whilst the rest (a large majority of them) are no more than slaves? And, this is supposedly the country, and economy, that epitomizes the best of humanity? BTW, no sarcasm, or cynicism, exists in the bones of the blogger. Rather, looking at the scope of things from the 'ideal' (which is available to all) shows failings everywhere (almost dense -- yes, humans are better than this). 
• Big chimera -- November, 2009, which was not in jest. One might ask how this can be so. We're about three years beyond, and the markets are up. For instance, the DOW, on Friday, went up 200 points after it had fallen for six days or so. Well, these things can be explained several ways which we'll get to. Remember, though, Ben pushing out of money, and his continuing efforts to cause markets to rise, are a big factor. Yet, the longer-term consequences are still there. This is a bubble (pure and simple) that will be pricked at some point (toxics are still there, ...).  

---

So much as happened the past month or so that it'll take some time to digest it all. I've been on a break, so to speak. The tone will change to one more academic and technical (how this transition will occur hasn't quite been worked out, as of yet).

It's probably comical that finance might think that LIBOR is a case of peer review (ah so!). If only. You know that it's more a continuation of self-audit (bankers are all angels).

Remarks:

12/06/2013 -- We all know how this panned out (with even more fudging coming to fore - the "f" in finance is for fudging?). If only Ben would put a shot across the bow. He's helped the chimera unfold in unhealthy ways. He could, at least, say a mea culpa.

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

08/01/2012 -- It's easy to point the finger at our Brit cousins. We have our own fudging (Ben, included).

07/30/2012 -- Timmy knew. Ben says he's powerless. They admit that it's close to fraud.

07/21/2012 -- This week, the USA Today, had a nice little article on LIBOR. Some are looking for a better alternative. Earlier, I had meant to point to comments about why potential fraud seems to be the consequence of the way that things are set up. As in, what is maximized is the ability to pirate. Why is this?

Modified: 12/06/2013

Banker?

Moral: Wherein we consider, just what does a banker do?

Gosh, we've been giving Ben so much grief that we've seem to have forgotten the real culprits. Jamie brings this back to focus.

---

So, let me tell a tale, somewhat disjointedly. We'll pull things together, in time.

There is a local bank with whom I've dealt for over 10 years, that is until a few years ago. It was a nice little bank, locally owned and all. Then, about 2004, they got new management and started on the merger and acquisition trail.

Now, remember that 'M&A' still is being pursued but recall, too, that these types of deals diminished when the 'boys' took their balls home (as in, they all knew that the games were crooked; who could they trust (they knew that if everyone was like themselves, then the answer would have been nobody (lemons, essentially) at all) to deal with?). Well, the main guy loomed large with his photo in the paper. They're grabbing more banks and approaching an entity that has over $1B in assets (yes, billion).

My reactions were severalfold. For one, this same guy was arguing that they would become a State bank in order to get out from under certain types of scrutiny. Oh yes, be part of the little guys. Too, they hired someone from OCC to be part of their staff.

Aside: I found out that this bank had their proverbial thumb on the scale in calculating returns. I was only a depositor at the bank. Didn't even have a checking account. Okay, I was making money using their bank, yet they are the ones who advertised the deal. Anyway, for a few months, I watched as divergence built in accumulative returns, compared to several other banks with whom I dealt. Note, please, that as a retiree, I was being cautious in scrutinizing returns in order to firm up projections. Lo and behold, these guys were playing unfairly. I called them on it. They threw me and my money out. Without any forewarning. I received an envelope with checks written on all accounts closing them out. Hey, debtors get better (have more rights) than that! I made the rounds of the institutions that are supposedly supportive of the consumer (before the new deal, okay). The state org, FDIC, and OCC. Now, OCC got from them some diatribe about me as a harasser. What? I banked with them for 10 years prior to their reaction to scrutiny of a customer. But, management had changed. So, the whole atmosphere was different. Then, OCC says (essentially, acknowledging the validity of my evidence), sue them. What (again)? Me, a small investor take on someone who has (at the time) multi-hundreds of millions in assets? So, I let it drop and have been quietly watching.

Oh yes, it was gleeful to see them line up to the TARP trough.

Then, I noticed this year the thing about being a State bank in order to have less scrutiny. Also, I hear that they want to merge with a bank in another state? That is, is not that interstate banking and beyond one state's purview?

---

Oh well, I read the boss' explanation. Oh yes, he says, merging has benefit from his level. What about his lowly depositor? You see, all sorts of 'M&A' has been going on because the best and brightest know that they can do it and can pull the wool over the eyes of the Feds (yes, Ben, you) and others. Yet, what benefit is there to the depositor?

Remember what happened to this depositor?

There are many questions of this sort. From where I sit, these guys are using banking as a playground to tweak their ego. I liked the bank better when they were almost a county bank with a few ATMs and little branches.

Now, the guy is trying to be Jamie II. What gives with this? I'm serious, folks, in my questioning.

Is not banking a mere utility mostly, to help us handle our beans and need for beans? Of course, 'our' can be at several levels, yet even commercial banking does not require the 'M&A' mania.

---

Enough for now.


Remarks:

01/14/2013 -- Will Jamie be taking a pay cut? He was the highest paid last time around. He also was the one saying that they could "police" themselves, that was no need for oversight. He got one thing right in a recent interview. He said that with the "whale" problem, people were running around like children. Their concern was not fixing some problem. No, the worry as about the problem's impact on their career. Ah, career. We'll have to go into that. Most people are not effective a most things. Unfortunately, those who are effective carry these folks along. Always has been like that. Jamie needs to consider that he is not, as he may think in him mind, of the effective set.

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

06/25/2012 -- Washington Post on Congressional non-ethics. 

Modified: 01/14/2013

Money and technology

Moral: Wherein we let the IEEE Special Report on the Future of Money get us back to looking at beans and money.

---

After all, those subjects being covered by the IEEE collection pertain to all of ours' future (to wit, the recent stumble). Not just those with massive accumulations (ostensibly, the best and brightest). I will need to revisit some of those articles here (later).

---

Meanwhile, a few thoughts on the matter suffice.

• One oversight, about which I'll approach IEEE, is how to explain 'fiat money' and not. Yes, money is an abstraction. We modern folks like our abstraction-phile-ness. We have carried it to far, way beyond attachment to being (give me time, not a simple issue).
• Yet, engineers abstract about real things (or about models that are eventually about real things). Ah, like leveraging? Not really. Why? Any point, their work gets back to nature (or Creation, if you would - it's an either/or issue, as Hitch knows). Money? Purely flim-flam (we're get there, too; it's a fact the big people do not want the populace to awaken).  
• IEEE, why didn't you talk about some natural analog (for one thing)? Sheesh, you guys are engineers. Just because we now have computational modeling and higher-order gaming via technology behind our 'beans and money' (and the 'markets' based upon these) does not make it anything more than a very shaky chimera.
• Stiglitz says that the American Dream is a myth. He's right on the bifurcation that has formed. See Rick's thoughts on the matter (and some consequences). 
• Another dichotomous relationship is between those who want it all and those who can live within their means (evidently, we've seen that most of the modern countries cannot do this). Of course, from some angles, the former may look smarter as they play with the lives of the latter (ah, one definition of royalty?). 
• One has to appreciate Tolstoy's remark: (see Remarks, 12/02/07) how much does one man need (by the way, Lev Nikolayevich was a class act as opposed to some)? 
• It's good to see engineers (beyond those of the financial idiocy) think of these matter; perhaps, they'll bring in some needed rationality. 
• Might add that one grating thing was that there was nothing about additional properties of 'money' (oh, you mean like? Can't buy me love, etc.). Wait, engineers don't deal with those things. Yet, they're willing to allow computer support for what is essentially pilfering (high-speed trading)?  

---

One thing about the modern age is that about every aspect of life has been superposition'd with some abstract'd thing which then goes back to Turing's foundation'l view (this is Alan's year). And, do not many consequences ensue (such as, the stress on STEM and numeracy as if that were what we need, solely)? Ah, so! The following may be beyond the pale of IEEE, but not of the scientific foundations that underlie the work. Ever wonder why the recent infatuation with zombie'ism (and states thereof)? Ever consider that it is our computational prowess that has led us down this path toward perdition?

Oh wait. The topic is money. Note, one article briefly touched upon was a role for 'money' (whatever is it) that was beyond the 'economic' usefulness. Yes, very briefly. That ought to be expanded upon, to boot.

Remarks:

07/25/2015 -- We're about six weeks after the June look back at 800 years ago (Magna Carta). Too, though, poster boys have popped out of the woodwork, including Zweig.

07/30/2013 -- The future: economy and technology.

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

08/04/2012 -- I can hear it: with the DOW over 13K, what are you talking about using 'chimera'? Well, look at the dire warnings, for one. Are you looking at FB as a poster boy? We'll get technical and explain the problem. Do we have a solution, at this time? Yes, essentially.

08/03/2012 -- So, the market pushers say that they need things like program trading, and whole bunch of other stuff that we'll get to. So, the idea is that we need computer-based 'gaming' in order to discover 'price' and to provide liquidity. Liquidity? Yes, like that put into the pockets of Zuck (see 7 points on FB) and his ilk after the IPO. You see, those who made money bailed when the price was high. It is estimated that if they sold now, the take would be 1/2. Notice that I didn't say return (for what? -- 'gains' obtained this way are near-zero). Whose to cheer that a few make some massive amount of bucks (well, beyond those personally involved -- even the bankers who put deals together)? This type of thing is capitalism? If so, do we really need this, folks?

07/21/2012 -- Another thing uncovered, gaming of LIBOR.

06/25/2012 -- Washington Post on Congressional non-ethics. 

Modified: 07/25/2015

First man (bank)

Moral: Wherein we re-look at Jamie (he deserves his own label) and his honesty.

---

Things have been quiet since Ben did his talking. But, you know that there is turmoil of several sorts going on. For one, a regional bank admitted that it sold mortgage-backed bonds for a big loss (millions). Better bite the bullet and let someone else have the 'toxic' asset, I suppose. And, the markets have been up and down, mostly due to Ben's largess and gaming. That whole scene (Chimera that it is) needs some toning down.

---

Earlier, Jamie bragged about being the last man standing. That raised some ire. Then, Jamie (see Jamie Posts) did an 'aw shucks' (see Remarks 01/16/2012) interview which seemed to brighten his image a little. At the time, was he looking for Timmy's job so he had to present other than his hot-shot, make-money-anyway-possible demeanor?

Then, today he steps up with some news. The tone was that they were going to look into this little problem of losing some money - heads will roll, he seems to imply. Jamie, why not use this as an opportunity to make Chase exemplary? Become the first bank to do so? Ah, bankers, class acts that they are.

Jamie and his peers at the rogue table

---

Let's look back at Jamie's bank and its history from another perspective. This is brief, but we need to deconstruct these modern (flim-flam) notions that are based upon an overly-confident attitude that we, through mathematics, science, and engineering (ah yes, STEM will save the world!), have made ourselves the master of the universe. Oh wait, it's only the finance types in their silly world, laying havoc for the rest, who think that?

Firstly, Jamie's bank (part of it) was named for a cousin-in-law (Salmon P. Chase). Wonder what the old guy would think of these modern shenanigans. Jamie talk his principles. What exactly are these (be first to the trough?, etc.)? Does he think that he could demonstrate these via Chase such that we can all marvel and exclaim Chase to be the paragon of banking virtue (yes, people, we need to run our money with monks, people of simple living, and the like -- betting, such as this news indicates, is adolescent -- wait, infantile is more appropriate -- did we not just clean up their dirty diapers?)?

Then, let's pick another old guy, cousin-in-law (George Peabody) who got the other part started. His piece of a common effort was taken over by J.P. Morgan after George retired. Of course, the Peabody connection went away (name, and all), but what else would we expect?

Again, what would George, who was beloved at death, think of the machinations that are allowed these days? And, this type of thing by what is, essentially, a utility (yeah, Jamie is the head of a service that is to provide for the commonweal)? Of course, even those utility types are acting up nowadays, too.

Both of these guys descend from early entrants to these shores. Are the dreams of their (our) ancestors (example) being fulfilled with the gaming of the chimera? Oh, some say, if we didn't, others would. Bogus argument, folks. American, the dream? Remember?

---

Again, why not make Chase the example of how banking ought to be done? These new instruments need to be under control and less opaque. Chase ought to help define the proper use (implying that there is an improper -- which is the current mode).

Jamie's little explanation hints at the casino aspect. Yes, hedges (on whose behalf?) gone awry. Where, pray tell, is the science of finance? Engineering? Looks more to be ad-hoc, playground activity albeit with the livelihoods, and savings, of those who most need a solid utility function (banking as infrastructure - not a source for exorbitant incomes leading to mansions, et al.).

Remarks:


12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

11/15/2012 -- SumZero, and more.

05/22/2012 -- We can let Jamie off the hook a little and for awhile.

05/14/2012 -- From several reports, it seems that Jamie is a talker, as in pulls the wool over "populist's" eyes. Too, he probably back-slaps, as well. That is one characteristic trait needed for those who would be 'kings' as we see with the CEOs. And, there was justification for the idiocy. Ah, they wanted to get returns greater than the cost of capital. Idiots. Ben is giving them almost free money. So, that's no excuse. As well, any take larger than a reasonable amount (already discussed and to be discussed further) is onerous to the 'populace' over whose eyes the wool has been pulled. 'near zero' is what it has been called here.

05/11/2012 -- Supposedly, the futures show some impact from the revelation. Yet, the big bucks (hedge funds, et al -- yes, Mitt needs to awaken to the issues) want opaque (they seem to love lemons - except for when these come back to bite, like this) dealings, and  more. Cover for shenanigans if truth were known (yes, fictitious - thank you, Karl -- too, Warren steps warily around these stupidities).

Modified: 01/02/2016

Ben's Lectures IV

Moral: Wherein we continue with Ben's look at the crisis.

---                       Lecture 1, Lecture 2, Lecture 3, Lecture 4

Foreword: Today's lecture (03/28/2012) is the 4th in the series (Aftermath of the Crisis).

Well, it has been interesting, so far, especially seeing him talk in real-time for a couple of lectures. One can see the rationale behind his decisions. However, from the initial blink to the open spigot, the impact has been more for the financial side's benefit than for the common citizen (oh yeah, prevent a downturn -- Ben, you know there are real people hurting?), especially those who have saved (and are being robbed by banks, 0.25% (or less) for a CD - come on!). Ben seems to be after two things:

• evidently, he wants our attention (and money) to be put toward the ca-pital-sino (at our risk) rather than in more safe instruments (ah, ever-clever finance has seen to it that there is no such thing as safe?). 
• seems that he would rather that the consumer be in debt, to their eyeballs, than to have real assets accumulated (notice, please, that market advances are not 'gains' in any real sense, many time - they are? show me an accounting of when it's not near-zero; too, daily there is what is essentially pilfering, rationalized, many times, under the guise of stupidity).

Somehow, those who foster on us the things talked about in Lecture 3 seem to be after a perpetual-motion analog (is p-m ever to be? - what we see is near-zero in action). And, we know that won't work (oh yes, CEOs, you do not WORK!).

But, enough; as we said in the first post, we'll hear him out even if his role would be best done wearing the garb of a 'magical' wizard. Ah, happy talking, indeed. So, to the final Lecture. 

---

Notes (italics, my aside, sometimes with links - times are clock - CDT):

~11:45 ... late start, on my part ...

~12:00 on QE, using chart
          2008 loans (blue), rose at first, then balance diminished
               as these got paid back
          LSAP  (red), larger area, added to the balance sheet

        why? lower long-term rates, for one thing
             inducement to move assets elsewhere

~12:04 how was this paid for?
          credit bank account of people who sold them
          showed the base light blue, currency
             not printing money (it's a metaphor, Ben)
             reserve balances go up (aeration, in any case)
                    not in circulation, not cash
          but, part of monetary base

       quantitative easing worked    30-year mortgage < 4%
            corporate credit became available
                 stock prices rose (ah, yes, to his good)
             confidence? up?
       not housing, though

~12:07 employment and inflation
            says inflation is low
               but not negative

       large-scale asset purchases, monetary
              fiscal: spending, taxation
           
       interest on LSAPs, profit to Treasury

       other tool, communication, open policy
         statement, such as defining price stability
                          which is, 2% inflation

      future, talk FOMC policy

~12:13 says recovery was mid-2009 (from 2007), GDP increase, 2 1/2 yr
          sluggish,compared to post WWII recoveries
             so unemployment still problematic
             housing, not recover
                vacancy rate high, continuing foreclosures
                    home prices going down

~12:18 too, tighter standards on mortgages
        higher credit scores needed (> 700)

        consumer less willing to spend, cautious
            new construction discouraged

        banking system is stronger
            expansion in lending

        European effect on financials

~12:23 structural issues not addressed by monetary policy

        the long run, abundant issues are still there
           headwinds, essentially

        so, now the (rah-rah) pitch
           growth, constant 3%, from 1900, Depression and recovery,
                 then at 2007+, a decline (permanent?)
 
           regulatory changes - for systemic+ issues
              Dodd-Fank, plus Consumer Protection Act of 2010

                = Financial Stability Oversight Council
                      Fed is a member
                = closes some of the gaps
                = too big to fail
                    more supervision, Volcker rule
                    stress tests (annually)
                    if keep from failing, ratifies the bad behavior
                          (moral hazard)
                       so orderly liquidation authority (FDIC)
                = require transparency for derivatives
                      get them out of the shadows
                = Consumer Financial Protection Bureau

~12:37 goal: being effective while controlling cost

          many thought stability was junior to monetary
            Fed's start was to prevent panics (full circle)
                 bubbles happen
            if can't prevent, can mitigate (ah, sounds like Alan)

         so, Fed prevented things from being worse

Questions:
-- Main versus Wall, monetary policy the latter, how
       to relate to the former:
    fed has done outreach, fed is accountable, does speeches
       complicated institution, not simple issues
         Americans don't like central banks

-- one the buy back from Fed balance sheet (unwind):
    pay interest on reserves (more than they will pay customers)
      drain, via other liabilities
        assets mature, or sell them elsewhere (Government backed)

-- help homeowners refinance at lower rate:
    harp program, for instance, FHFA (for underwaters)
      banks may not be part of all programs
        Fed not involved with those

-- deflation (japan's experience), cushion (2%) too small:
     international consensus around that
        must be above zero, but can't be too high
           research issue

-- monetary and structure problems:
    housing, white paper on the issues
        no recommendations, but did the research
    Europe - difficult, firewall to stop spread of contagion
    labor - training

-- other tools:
    give me an example, Ben says
         unemployment continuing, countries failing
     he has laid out the tools
          hopefully, F-D will help protect
    don't have other tools beyond what was said

-- key indicators, for tightening:
    jobs creation, unemployment claims
    demand and growth - consumer spending, sentiment, capital expenditures, etc.
    inflation, of course

Post the questions: Prof Fort talked about how the series came to be. Fed's initial query in Dec, 2011. Lots of coordination, since then, required on both sides. These four Lectures will be the basis for the rest of the class. Much to discuss. (ought to be interesting)

Remarks:

04/01/2013 -- Ben as the new Central Planner.

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

04/03/2012 -- Response 1.

03/30/2012 -- Ben didn't mention student loans as his focus was on what had already happened. He carried on with Alan's short-sight. What about student loans? How can something so simple get so screwed up? Thanks, Sallie (cousin of Fannie and Freddie). 

Modified: 04/01/2013

Ben's Lectures III

Moral: Wherein we continue with Ben's look at the mess and its aftermath (do we want to know what roles contributed to the problems and the lessons to be learned by those involved?).

---                       Lecture 1, Lecture 2, Lecture 3, Lecture 4

Foreword: Today was the 3rd (on youtube, transcript (pdf), slides (pdf)). The first two lectures were on 3/20 and 3/22. Material (video, transcript,slides) are available at federalreserve.gov (media center). There will be one more after today. These are being hosted by the George Washington University School of Business. The following are notes and comments that were taken while watching the third video today. See earlier Lecture posts for background.

Note: Since both the transcript and the slides are available with the video, the below notes are terse entries to jog my memory later on. Ben did a good job of talking about the crisis, gave his side of many of the stories (information not available through the press), and supported the actions. He used 'ad-hoc' several times which is in his favor. He expressed the distastefulness of what they had to do (I agree). Next time, he'll talk the future.

---

Notes (italics, my aside, sometimes with links - times are clock - CDT):

Last time, we heard about the onset of the crisis. Today, we'll hear 'what he did next' from a prime player.

Ben reminded of the context, the 2008 financial crisis. Too, there are two responsibilities. For the financial stability task, the thing is to act as lender of last resort. For the economic stability task, the focus is on monetary policy, principally interest.

~11:47 -- recap on vulnerabilities (see Lecture II), there were both private and public
     private -- too much leverage (result of the long-going moderation?), exotic securities
    public -- gaps in regulation, even fannie & freddie
      they pioneered securitization, using morgages for packages, but f & f' got to where
         they operated without adequate capital, and other problems that portended problems

     (this was seen, by many, long before the crisis --
                     it would be interesting to list those discussions)

        also, f & f' started to buy packages from others, of unknown value

        on triggers     mostly non-standard mortgages
              payments assumed rising house prices, anytime re-financing (post a year, for example)
                many types, ARM, option-ARMS, too long term 30+ years,
                      even negative amortization

         showed a couple of ads, one offered this: 1% start rate, for a year, only needed to
                   state income (no documentation required), 100% financing, interest only
                           (get this!) debt consolidation (put together your credit card and other debt
                                           rolled into the mortgage)

    so, these things were packaged and sold into the financial market
                    (2011 - Tranche and trash, 2007 - Tranche and truth)
             CDOs - combined mortages, and others
               then tranche'd, which leads to complex and opaque entities
                   these were given AAA (see below)

      sold to pension funds, foreign banks, etc.

~11:57 -- AIG (got special attention several times), used other derivative types
                         to insure these above, which amplified the risk
         
               the AAA?, partly through negotiation

            (essentially, junk offered) large basis for the crisis

     what is a crisis: some illiquid event, causes loss of faith, then panic (runs)

      2006, 2007 - mortgages started to fail, shifting the ground under the securities
             actually, not large losses (compared to movements on the stock market)
               but, no one knew was responsible for what
                        (too, leveraging brought into the securitization scheme)

        during the depression, 1000s of bank failures, small
          2008 Bear Stearns (mar), Lehman Brothers (sep), Merrill Lynch
              and mae and mac (propped up by Treasury)
                   AIG, Washington Mutual Bank, Wachovia (oct)

        for a depression, central bank needs to lend, also be accommodative

            2008 vigorous action by Fed, also G-7 (Oct 10)
                    shows interbank rates, went up (2007), then down (after Oct 10)
                       didn't trust each other 
                (hah! worse than the lemons problem -- "... the recent affair where the 
                       bankers (and other financial types) essentially froze their gaming 
                        as they knew that they were dealing mainly with crooks 
                            (like themselves) ...")
   
      Fed, discount window, longer terms, lower rate, auctions
               new programs, and collateral for loans

      enhance stability, allow availability (didn't work)

     emergency authority already in the law (13-3)
       banks, broker-dealers, paper borrowers, money market funds, asset-based securities
                     that last, consumer credit

        mmfs     buy shares, invest in short-term assets (commercial paper)
                     $1 share price
                 not insured         on demand, plus interest
           90 days, non-financial (payroll, inventories), financial (manage positions)
       lehman created a shock-wave, was into cps, plus mortgage, comm real est securities    
                                    lehman  both cre and mortgage hits
               withdrawals, ..., no new capital, so bankruptcy
                      even Fed tried to help

     mmfs failed their $1, hence redemptions (run or panic)

        Treasury, Fed provided backstop, ..., run ended in a few days

            about billion a day outflow

             mmfs started to drop cp which went into shock
                   cp rates went up    
              so Fed again     bolstered confidence
                   cp rate peaked, then recovered

              mar 08, bear stearns to jp morgan
                  oct 08, fed bailed out AIG
                       AIG said that they would insure what were bad securities
                            (no doubt, all sorts of bonuses for this crap)

               AIG did have collateral, 85 billion

                      Fed repaid, but Treasury own stock
                             distasteful, not to set a precedence

~12:34  too big to fail (will go into next time)
                trying to end this                      

    gdp down 5 percent     manu 30 down       homes 80 down
             serious collateral impact (yeah, savers sacked)

                      8 1/2 million out of work            global slowdown
                threat of a Great Depression

                 it was worse, the policy response seems to have worked

       indicators: stockmarket, 29, 07    truncated timeline, essentially
                         (yet, moral hazard still there - too, we have not
                                un-wound from the computational influences)

             15-16 months, stock price recovered, in U.S.
                       (so, what does this mean beyond aeration?)

           industrial production,        large v,  versus short, less deep v
                       (we'll id the slides when they're out)

~12:39       aftermath next, recovery, change, lessons

questions:
-- why the bad mortgages with high risk? --
      too much confident about prices going up
            1 year, then re-finance            
      demand for the securitized product
         ever-clever finance,  (he said that) 
             took the mix, then engineered AAAs (something from nothing)
               kept the bad pieces or sold
                of course, [would try to] sell them off [if there were a problem]
     it was profitable (short term, yeah bonuses)

-- volcker rule? --
       will talk about this next, reduce risk, prevent banks from doing
             proprietary trading -- legitimate exceptions (hedging, make markets)
               how to keep exceptions in control?
        liquidity - trading volumes  (he sees as important!)
               contagion - sell offs, lower price, puts pressure on those
                     who still hold

-- global collaboration, G-7, bail-out of AIG? --
            some inconsistencies, say Lehman UK and US,
              complexity is that something too big to fail might be international
                    how to help them fail safely?,
       said ad-hoc, no lead time was problematic
            cooperation between federal banks
               some use dollar funding
                  swapped dollars for euros (still in existence)
             coordinated cuts on same day in 08
      cooperation will be an on-going issue

-- off-balance sheet vehicles? --
       accounting rules, create vehicle, bank might own part,
           limited control, so separate organization, to get away with less
                 capital, ..., rules have been re-worked, need to be
            consolidated and put on the books

-- large firms, too big to fail -- how do you decide? --
             no doctrine, judgment on size, impact, etc.
            reform is to get rid of this     bad, unfair, etc.
        said they chose the least bad thing to do
       tried to be conservative
         AIG was obviously in need,
           Lehman was insolvent, couldn't borrow from the Fed
               was before TARP, there was no way to do the lone
         ad-hoc, again
            now, they'll have to assess how critical some bank is
                size, complexity, inter-connectedness, etc.
       on merger, will it create a more dangerous situation?
                numerical thresholds need to be determined
          if bad, no merger
     more focused on stability, group working on metrics, etc.

-- vulnerabilities, ratings, buyers would want better ratings,
             why these didn't come forth?  --
     you would think that it wouldn't be the seller who did the rating
             the buyer bears the risk,
         free rider problem, how to keep the work secret?
               better incentive for credit raters
                 investors would have to save the cost,
                      not want to give it away

Remarks:

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

04/03/2012 -- Response 1.

03/28/2012 -- New page covering the series and its material.

03/28/2012 -- Distasteful? Many are saying that (Romney, et al). However, we could have NATIONALIZED the idiots. Perhaps, we ought to have (we would not have been any worse off). Of course, Ben's mind cannot grasp that notion. He says 'ever-clever' finance. Well, their antics hurt the rest. Why is that type of thing allowed? He says accounting is to blame. Who works to monitor/limit the 'smart' idiots and their tactics that lead to inevitable messes? How about having more mature approaches as the standard? Hey, Harvard!! You there? Oh wait, you left that realm in the mid-1800s, right?

03/28/2012 -- Added links. Will update when transcript and slides are available.

Ben needs to think about how he's sacked the savers (they are legion) over the past few years just so that he could get his pseudo-capital markets back up into an inflated mode (as if the ca-pital-sino, as evolved, is it for us). Ah, big guy!

Too, he's looking only at junk via mortgage packaging. Big guy, there were other types, and you know it. Plus, leveraged buyouts have been part of the scene for a long while. In many case, wrecking havoc, in the small, that is much worse than this slowdown which came from silly games.

Modified: 12/13/2012

Ben's lectures II

Moral: Wherein we continue with Ben's explanation for himself (which, we hope, is more than fairy dusting upon a gab'd standard).

---                       Lecture 1, Lecture 2, Lecture 3, Lecture 4

Foreword: The first of four lectures was on 3/20 (video - also available at federalreserve.gov). The second was on 3/22 (video). There will be two more. These are being hosted by the George Washington University School of Business. The following are notes and comments that were taken while watching the video today. The intent is to watch all four of these and to summarize at the end.

Today, I watched real-time. I'll delay and watch the video after the fact, henceforth. It was a little different; as one could watch Ben work his thoughts into words. However, after the fact, there can be a pause to see the slides (in real-time, they're only flashed momentarily).

Too, the first four posts will be re-capping only and will provide a means to link into work already done on this and the related blogs. Summarizing, and analysis, will occur after the last video. While listening, it was too easy to turn Ben's comments around and put them into a context for a question. That is, he is being driven by his abstract'd background which is great (don't get me wrong). And, he's lifting out to that realm where it's more fuzzy, by nature. The trouble is that when one then goes back to the technical space, things don't match up (it's partly topography, in a sense).

---

Notes (italics, my aside, sometimes with links - times are clock - CDT):

Ben restated the need to take a historical view to set the context.

~11:46 Today, he will go over early challenges (post WWII), then cover the great moderation, and finally get into the current crisis. Reminder: macroeconomic and financial stability are goals.

~11:49 During WWII, the Government kept interest low, post the war, keeping them low was seen to risk heating up the economy, and leading to inflation

          1951 – FED got okay to be independent in setting interest rate

          William McChesneyMartin, 51-70 (the longest term), the idea was to lean against
              the wind, whichever way it blew, even so, there were 2 recessions,
                   plus the expense of Korean effort.

          By the 60s, the policy was too easy, hence a surge in inflation, until 79, peaked at 13%

                       

~11:54  Why? Ben used 'optimistic' on his slides
                  (but the idea was to think about parameters),
                         implying an ability to control, however response was mostly too slow

              Too, theory started to say: permanent tradeoff between inflation and employment

          70s: oil (Israel & Middle East) and food shocks, costs of Vietnam war, rising inflation

              Nixon’s wage-price controls tried to dampen inflation, didn't (as we know)

           Arthur Burns' comment: change supplies opportunities for mistakes
                      (Ben, you listening?)

           About 'optimism' and its association, fine tuning (if only)

~12:01  1979, Paul Volcker, came in, facing double-digit inflation, during Carter's time,

                         PV raised interest rates, established a disciplined approach, also allowed
                                big change, that is, other than small deltas

                  80s, there was a drop, to 3 to 4 % from the 13%    (so, FED was successful)
                              collateral damage (isn't there always, as we're seeing with Greece)

                             unemployment went up, peaked at 11%, 1982

                   Reagan and congress continued to support Volcker

~12:06  1987, King Alan's time, he held it for almost 19 years (see WMcM, above)

                   his time was of the 'great moderation' and growth
                                (not the stagflation of the 70s)

                   GDP growth rate (chart) shows a dampening into a smaller span, less variability

                           Recessions, 73, 81; the band was stdev 

                    was same for inflation, smaller band
                               (one could think control, almost)

                  Why?  …, monetary policy was a focus, therefore economic stability,

                       …, but, structural changes, too (inventory management, for example)
                                 and luck?

                  Downturns during the period, 1987, 2001 (dot com)
                               87's influence short-lived, the dot com? see below

~12:15   Housing bubble (late 90s to 2006 - remember, a retrospective, 
                               he did not see this in 2007, see note yesterday)
                   turned out to be a 130% rise in prices

                   too, lending standards deteriorated

                          the thought: couldn't lose?, house prices would keep rising,
                   as well, underwriting became bad

                   in short, poor mortgage quality
                        before 2000, down payments, documentation of finances,

                   then nonprime came to fore (more than subprime)

                   peak of nonprime, middle 2000s, 1/3 were non-prime

                          also rise in those with no documentation, 60% little or no docs

                                          (sell at any cost, was the slogan)

                   but, with prices up, payments up, so, how to pay?
                          eventual dampening, 2007, hit the limit

                  then, declining demand, 2006, prices dropped, 30% drop across the country

~12:22   Aftermath, …, some felt rich, then were underwater
                               negative equity (to say the least)

                      12 million, out of 55 million, were underwater

                  too, delinquencies and foreclosures up signicantly                            

~12:24    (Ah)  securities based upon these mortgages, had losses
                          (understatement, I want to hear about the toxic)
                 says that we need to consider triggers vs vulnerabilities    
                         housing losses were like dot.com

                                 but, dot.com had a smaller effect

                decline in prices and loss of mortgages were triggers

                        vulnerabilities enhanced the effect of the triggers of the housing bust

                what were these??        
                           = too much leverage (debt)

                           = lack of sufficient monitoring of risks (complexity of the securities)                       

                           = confidence from the great moderation?

                           = in 2006, they wouldn’t have been able to say what the impact of

                                   a house price drop would be  (lessons learned?)

                           = short-term funding, and exotic instruments (toxic, to boot)

                                     CDS, as an example used to sell insurance,
                                          if you lose money, we’ll cover you,

                                               (hah) or so they said
                          

~12:31  Where was the government --- AIG was without supervision

                   = regulations lagged and supervision, such as consumer protection

                   = no one looking at systemic issues working against stability

                         no real oversight,
                   = then, there were fannie and Freddie

                   = even if laws were there, not implemented  (FED, too)

                           FED didn’t measure risk as it ought to have and banks couldn’t

                                banks could monitor themselves?

                   = no cooperation, FED, FDIC, SEC (turf issues)    

                   = nobody was looking at things in the whole (but, then, who can?)

~1236    Monetary policy, too low interest rates in early 2000s?, in 2003, 1%,

                                   it increased the demand for housing,                             

                  but, UK had a housing boom/bust even with tight money

                       …, too, housing bubble was beyond scope of mortgage rate changes

                                     …, size of bubble was huge (so, other factors)

                  Germany and spain as example, germany housing flat, spain boomed

                  and, timing, started 1998, even rose after 2004 tightening

                  Asian crisis, reserves built, needed investments
                         capital inflow heats up markets

                          so what was the monetary influence?
                                 (these were quick asides as he has two more hours)

~12:41    References on the topic
                             stress went up, stocks declined,

                             home construction went way down, unemployment 

~12:46  Questions (several of these were of the same vein, plus Ben punted some
                                       to the later lectures):  

                tighten: too early, too late --- how to know?,
                          challenging, forecasting is difficult,
                 plus expectations change, prices up,
                          so wage demands increase, etc.
                                 (I hope that he touches on the issues of
                                    unwinding from his hugely inflated 
                                         balance sheet -- anyone even talk
                                            moral hazard any more? 
                                               ought we look at why?)

               2000, low rate, didn’t spark the mortgage bubble?--- in 2002, paper
                             bubbles and  monetary policy, …,
                          need to use tools correctly, …, plus, regulations and monitoring

                                       …, ought to have been done better, …,

               Global imbalances, borrowing increase plus greater consumption? --- says low
                                   rates increase capital (yes, one thing he can re-look at)

                             capital increases (ah, yes – the markets),
                             too, trade imbalance is down

               2000, interest not cause of the mortgage, but what about forcing riskier
                           investment (or as we can say, sacking the savers)? ---

                                 says balance needed,

               2000, did he see recession coming? --- he was Economic advisor for Bush,
                                   they looked at house price declining, possible effects thereof,

                                       didn’t see that the decline would have such a big effect,

                                                     he’ll be going over the chain of events and causes

               government lending for more mortgages? --- the American dream,
                        home ownership goal, but, Ben says, the worse loans were private
                           sector, not Fannie/Freddie,

                                (who seemed to have gotten greedy later)

               transparency, can it be too much? --- it’s important for accountability,
                              can make it work, …, 'tis better,
                                as market then know how to respond
                                       (remember when Ben blinked?)

              price stability, liquidity? --- his actions are trying to bolster confidence
                             with easy money (see Lecture 1) 

Remarks:

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

04/03/2012 -- Response 1.

03/28/2012 -- New page covering the series and its material.

03/26/2012 -- From the Fed's media center (Lecture 2 PDFs - Transcript, Slides). As an aside, see Slide 35. It references unpublished material that would suggest that low interest rates do not cause housing bubbles (no smoking gun, yet). Looking forward to the next two. As well, see that I'll have to go back to his Jan 3 talk dealing with this subject. Ben realizes, no doubt, that housing is not the only issue. We can easily find companies (probably even banks) who went bankrupt from over-leveraging (related to cheap money and more). Do we know what shenanigans have come from too-easy rolling out of securitization schemes (are they not, too, related to (actually implicated in) this mess?)? And as far as a smoking gun (their metaphor, not mine) goes, is not the current policy standing savers up against the wall and knocking them down one by one (well, at least, picking their pockets to the point of depletion)?

03/23/2012 -- Minor updates. Links added.

Modified: 12/13/2012