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I sure am glad I have zero debt and enough liquid reserves to live off of for at least two years. I really don't see our current economic paradigm surviving the human resource glut that's coming down the pike, though, especially in Canada. Nobody my age is going to climb a corporate ladder and retire in Florida, that sort of career is ancient history.
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Dec 16, 2014 05:56
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gently caress, Hal, write out the acronyms. You come back from the dead and you're still writing the same opaque poo poo.
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Dec 16, 2014 06:05
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I honestly can't tell if Hal is a genius or a raving, babbling, stores-urine-in-jars lunatic.
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Dec 16, 2014 06:08
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He's not half wrong that financial illiteracy is exactly what got us in this mess and D&D could use a good shot in the arm about how the markets work, but the kind of complexity of thinking that gets somebody to talk like that is exactly what makes representatives' eyes glaze over. It's a sales job.
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Dec 16, 2014 06:15
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Lexicon posted:I honestly can't tell if Hal is a genius or a raving, babbling, stores-urine-in-jars lunatic. He's definitely educated in the subject; I recognize a lot of the jargon from way back in the day... though not all of it makes sense. I will admit to being a bit out of my depth with regards to some of it, as my education is out of date and as my career experience went in a different direction. Anyway... For example, consider the Value at Risk (VaR) comment on your RRSP. The orthodox VaR calculation is the amount you'd lose in a p=0.05 situation, i.e. 5% of the time you'd lose this much or more. In other words, if you're doing a monthly VaR, you fully expect to see this or worse once every twenty months. It is thus blind to long-tail or extreme systemic risks such as those mentioned in Hal's post - and those that took place in 2008. (For those educated in statistics and the normal distribution, this corresponds to a z-score on your portfolio of -1.96.) Actually, the 2008 events would never have been caught by a VaR analysis as, according to standard risk models, they were unlikely to occur before the heat death of the universe. Anyway, regarding your average RRSP... well, I have to go into a bit of an explanation here. An interesting thing happens when you combine securities; the return from any two securities is a weighted average, but their net risk is based on a weighted average that is itself reduced by a covariance that represents the fact that idiosyncratic risks, which are specific to issuers, are unlikely to affect all issuers in the same way. To put it in simple terms, suppose that you invested in both Ford and Apple; it's possible that the new F-Series will be a flop and cost the company money, and it's possible that the new iPhone will suck and everyone will buy Androids instead, but it's less likely that both of these will happen at the same time. Put enough different securities together, and eventually you have essentially reduced idiosyncratic risk from the various actors to zero. This means that idiosyncratic risk is essentially optional, and therefore will not be rewarded by the market as it is possible to put together a portfolio that returns the same but has less risk (and is therefore strictly superior; it can't have the same value according to arbitrage pricing theories). This is a process known as "Markowitz optimization". The end result is that the only risk the market really rewards for is the kind you can't diversify away - market risk, which is measured in terms of a performance covariance with the market and represented as beta. (It also means that stock picking is theoretically a waste of time, unless you have information the broader market doesn't.) The bigger your covariance against market performance (say, if you prefer highly-leveraged stocks that are very responsive to economic conditions), the better your return can be expected to be. A regular RRSP portfolio will, typically, have a low beta. This has the effect of reducing the effect of market swings on its value, which will generally shrink your VaR. What this all has to do with theta decay is beyond me. Theta decay is a concept from options valuation, which is actually a newer subject than Markowitz optimization. Options derive their value from two sources: their intrinsic value, which is based on the money you could earn if you exercised the option now (and which could very well be zero, and often is), and their time value, which is based on the possibility that their intrinsic value will become positive before they must be exercised - you can look at it also as being a price paid for risk. Obviously, time value declines as the exercise date of an option draws nearer; this is known as theta decay. If you really care, you could examine the Black-Scholes option pricing model to see how option prices decay as the time to maturity (which appears repeatedly in the formula as [T-t]) declines, but it wouldn't have too much to do with your RRSP unless you've based your retirement on derivatives. The Wikipedia article actually has a handy formula that will calculate your theta for call and put options . If I had more time, I'd go through his post in more detail - but I'm not sure it'd get me anywhere, and I'd have to do some reading.
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Dec 16, 2014 06:44
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This option pricing and portfolio theory stuff is fascinating - I mean that sincerely - but I don't really see how it's relevant except tangentially to the thread topic.
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Dec 16, 2014 06:51
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Lexicon posted:This option pricing and portfolio theory stuff is fascinating - I mean that sincerely - but I don't really see how it's relevant except tangentially to the thread topic. It isn't. (Asterisk: It's a particularly relevant tangent according to Hal_2005, as these factors might be related to potential systemic risks in the Canadian economy that would contribute to an economic collapse that would most certainly deflate the housing bubble.) David Corbett fucked around with this message at 07:01 on Dec 16, 2014 |
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Dec 16, 2014 06:53
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Kafka Esq. posted:He's not half wrong that financial illiteracy is exactly what got us in this mess and D&D could use a good shot in the arm about how the markets work, but the kind of complexity of thinking that gets somebody to talk like that is exactly what makes representatives' eyes glaze over. It's a sales job. I keep try to explain what I know in the threads I follow, but often get shouted down by people that don't actually work in the markets about how things can't or shouldn't work the way that they do. Hal's posts are factually mostly accurate but could be written in a more user friendly way. He writes like the kind of guys that get locked in a closet at the banks and made to write algorithmic trading programs. His comment about currency-related I'd guess is related to the impact of embedded options in currencies underlying businesses which produce locally and sell globally. Each sale of a good is a sale at a real price at a point in time with an option on the currency and commodity with the same term as the settlement period. Beyond that I'd be guessing at what he means.
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Dec 16, 2014 07:07
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Kafka Esq. posted:D&D could use a good shot in the arm about how the markets work In what way? I tend not to post much in this thread because I don't have a very good understanding of current markets. Historical markets however....
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Dec 16, 2014 07:16
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Dreylad posted:In what way? I tend not to post much in this thread because I don't have a very good understanding of current markets. Historical markets however.... I don't know that I have a representative sample of D&D when nobody talks about it, but - well, yeah, nobody talks about it. Usually that's a sign that nobody thinks they can put up a good argument about it. It's like when LF effort posts came through and everyone would bow and scrape to Cefte or whoever wrote the Haitian revolutions thread, but not participate at all in the discussion. Meanwhile, Israel, guns, climate change and other G-spots will get a good showing because the arguments have all been rehearsed.
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Dec 16, 2014 07:30
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Kafka Esq. posted:I don't know that I have a representative sample of D&D when nobody talks about it, but - well, yeah, nobody talks about it. Usually that's a sign that nobody thinks they can put up a good argument about it. It's like when LF effort posts came through and everyone would bow and scrape to Cefte or whoever wrote the Haitian revolutions thread, but not participate at all in the discussion. Meanwhile, Israel, guns, climate change and other G-spots will get a good showing because the arguments have all been rehearsed. The normative arguments around the function of the market are also vastly more interesting - and accessible - than the positive arguments.
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Dec 16, 2014 07:35
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David Corbett posted:It isn't. Yes, thats the rough ghist of it. I just saw the PM's. I basically said, without derailing too much is that things are alot more correlated than what people think it is like. And as an aside, when you, as the central banker of Canada decide to raise rates; the most at risk peoples will get thrown under the bus, namely youth and marginal workers. Each one of those cases I said, were things which happen when we see a correction leg of the business cycle, but many are not aware of those type of how something abstract like a federal overnight rate (which is what banks can rent money at, to then loan to you at a fee & profit) will affect your ability to get a job, save for a home, qualify for a loan, plan for retirement or even enter the labor market in a steady job. The thread was started because people were noticing the average price of a home or secondary market home was growing out of their income bracket. The choice was, people could chose to buy now (many could not) or hope for cheaper prices later. Many chose to not spend and take their chances later. Well, later came. Rates are going up, and if you can afford a house now, you will wait until the market cools and try your luck at buying a started home, which for most is their most and only valuable asset. That home is often purchased on leverage (mortgages) and your ability to finance it totally depends on 1. if you are making money 2. you are in a growing economy 3. if the market is going up. Now normally this happens, in fact it does for nearly all the post-war 1950-2001 period. Only then, it stops. In countries like Japan or Spain, it never restarted really. That choice, your ability to control your financial investment or consumption habits is an option, and it decays as you get older. Many just assume, "hey, I'll get rich someday" and you constantly either defer or you accept you will never get to the affordability level set by the market; a market filled with tons of stagnant buyers who bought a house at the top, and have no inclination to sell at your price level unless forclosed. And we all saw how well a housing led recession led to the growth areas of Florida, Los Angles and Nevada 7-years later, right ? Same thing happened in Calgary, Vancouver and most of the west post-1980. In that last time Canada had a recession of this scope we nearly lost our credit rating, and only after the Mulroney government pulled in David Dodge to pull a Paul Volker, whereby he had to structurally reset our markets and they pulled an Abenomics and rebuilt our labor industry over the course of 5 years did we ever grow again at our true growth rate. Inbetween 1987 and 1997, Canada barely budged. And as the various Quebec drama's proved, it had detrimental and far reaching consequences, well beyond the NEP rhetoric and junk bond mania which happened mostly out of our internal market controls. If you think I'm full of poo poo, go to your local Canadian branch and ask what your local bank manager what the 2020 rate on the canada savings bonds are. That's roughly the growth rate we all are expecting. As a rough approximation, a guy called Lucas did some math, and said that for a rough point of GDP, or if we have zero inflation, you get 0.5% more employment of the population at 'middle class'. Hiking rates, retards growth. So: if the economy is only chugging along now at a pathetic 1.2%/year, as of last week, and our inflation is 2.3% per year (definitely more if you buy cheese, video games or rent anything), then your economy is currently slowing down, and will only slow down harder when they raise rates. Which means more of your middle class, or those seeking middle class life will have their savings (assets) thrown lower down the foodchain, all to quell; inflation. This is a pretty dovish (ie: humanistic) view of what happens, but it's largely true in Canada's case as an export, small pop. economy. When people do not understand that "decay" I wrote about above (and all the intricacies that follow after that initial 2 sentences) they indefinitely save, which is what is happening in Japan and the EU, which is why, as I said in my first post; having some finance knowledge and understanding on just what "deflation" brings to your quality of life is critical. Perhaps one of the most critical things you should learn in the math classes between algebra and how to buy a car with a 0% down layaway. But many dont, and it has not been mentioned in the thread, despite a huge number of pages; which is why I wanted to bring it up before turning off for the night. That expectation that things get better is pretty important. Its called inflation expectations, or animal spirits to the economic dorks. Many think jobs, and high quality jobs just come out of somewhere; but if you look up Paul Krugman's work, before he went all loony, he wrote a bunch of work on just how trade works. In an export led country like Canada, where nearly all our sectors are massively inefficent vs. indian, chinese or Latin American labor, which works for an 1/8th, and pays zero labor cost will practically ensure the chance of Canada returning to the Quality of jobs formed as at 2014, for 80% of Canadians will never happen for a good 20 years after this "soft landing". If you, as a 14-30 year old goon does not make that you really pissed off, then it really should. That was my message, because of all the things which make Goon or goon led communities really angry, having guys straight up say: "Hey, guys? do you see Europe's growth rate? Settle in, thats the new normal". Yet the thread, since its inception is only focused on the current market, and has never abstracted or even thought about what the post-"correction" will mean for their lives. I hope that makes a bit more sense, and explains why i wanted to sperg out for the thread.
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Dec 16, 2014 07:43
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Hal_2005 posted:Yes, thats the rough ghist of it. I just saw the PM's. I basically said, without derailing too much is that things are alot more correlated than what people think it is like. And as an aside, when you, as the central banker of Canada decide to raise rates; the most at risk peoples will get thrown under the bus, namely youth and marginal workers. Each one of those cases I said, were things which happen when we see a correction leg of the business cycle, but many are not aware of those type of how something abstract like a federal overnight rate (which is what banks can rent money at, to then loan to you at a fee & profit) will affect your ability to get a job, save for a home, qualify for a loan, plan for retirement or even enter the labor market in a steady job. Right on the loving mark.
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Dec 16, 2014 08:09
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Yeah. If anything, my only real contribution to the topic at this stage is That expectation that things get better is pretty important. Its called inflation expectations, or animal spirits to the economic dorks. Many think jobs, and high quality jobs just come out of somewhere; but if you look up Paul Krugman's work, before he went all loony, he wrote a bunch of work on just how trade works. In an export led country like Canada, where nearly all our sectors are massively inefficent vs. indian, chinese or Latin American labor, which works for an 1/8th, and pays zero labor cost will practically ensure the chance of Canada returning to the Quality of jobs formed as at 2014, for 80% of Canadians will never happen for a good 20 years after this "soft landing". If you, as a 14-30 year old goon does not make that you really pissed off, then it really should. That was my message, because of all the things which make Goon or goon led communities really angry, having guys straight up say: "Hey, guys? do you see Europe's growth rate? Settle in, thats the new normal". Yet the thread, since its inception is only focused on the current market, and has never abstracted or even thought about what the post-"correction" will mean for their lives. I'd take that one paragraph, and send it to every goon, in Canada and the US. If you read that statement, and are 100% fine with everything in your life, that's cool. But many are not even thinking of how rate hikes or ZIRP is going to affect them, and that is something which is important, and the whole point of this thread actually.
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Dec 16, 2014 08:17
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Hal2005, what's your opinion on this riposte to summersian secular stagnation? http://ftalphaville.ft.com/2013/12/11/1717992/secular-stagnation-and-the-bastardisation-of-keynes/ quote:Credit bubbles, the authors believe, caused western economies to run dangerously above their potential in the decades leading up to the current crisis creating an impossible stock of goodies, which could not be shifted or consumed by western economies without crashing the underlying markets. Think of it as too much too soon. Or better still, too much of the wrong stuff too soon, and too little of the right stuff too late. The result: the creation of faux capital which has never been unwound. Isn't this what we're seeing with the tech bubble which I presume these guys would classify as 'productive capital'? Ok not yelp and 4square but stuff like Tesla/SpaceX and perhaps Google, Apple, to a lesser extent Salesforce, Vmware;
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Dec 16, 2014 08:19
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lol this thread has never considered what the debt bubble means for their lives. Did you seriously drop in from the sky? Where did you go for six months?
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Dec 16, 2014 08:25
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Kafka Esq. posted:lol this thread has never considered what the debt bubble means for their lives. Did you seriously drop in from the sky? Where did you go for six months? stop posting idiot
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Dec 16, 2014 08:27
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I could easily deal with an 18% loss in wealth, since I barely have any to begin with, and I could also deal with a huge rise in interest rates, because I barely have any debt either. Put that in your pipe and smoke it.Hal_2005 posted:if the 10-year market suddenly expands by YYZ%, What's a Pearson percentage?
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Dec 16, 2014 08:32
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Cultural Imperial posted:stop posting idiot Yo, keep kissing his throne, man. It's changing my whole opinion of you.
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Dec 16, 2014 08:33
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From what little I've learned so far in my own studies in finance the problem with trying to actually use the scientific methodology seems to be that it doesn't really apply to reality. People aren't rational actors and the one thing that has become a constant since the financial markets where essentially freed back in 1980's is that they crash constantly, which there really is no accounting for. The methodology works fine in stable markets but since those are pretty much the exception in the current financial climate their worth diminishes. Rationality is always the first thing that goes out the window when a market or a sector starts becoming overvalued and it can be observed in multiple countries and IT-companies right loving now. It doesn't matter how much you divide up your securities when crashes leads into crashes as could be observed with the global dip 2008 caused which indirectly set in motion the 2011 European crisis. To make matters worse the stagnating rates of the national bonds are pushing more money into housing and the stock market which just accelerates the issue further.  Anyways, isn't it time to start a global finance thread? There certainly seems to be enough interest from what I've read here and in the EuroPol thread.
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Dec 16, 2014 08:41
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So, if I'm reading this right, Hal was just using 'theta decay' to refer to monetary deflation. I'm struggling to parse his post because of the excess of  .
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Dec 16, 2014 10:56
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Kalenn Istarion posted:I keep try to explain what I know in the threads I follow, but often get shouted down by people that don't actually work in the markets about how things can't or shouldn't work the way that they do. Day-to-day work in the markets doesn't actually imply that you are an expert on macroeconomics.
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Dec 16, 2014 14:20
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Hal_2005 posted:That was my message, because of all the things which make Goon or goon led communities really angry, having guys straight up say: "Hey, guys? do you see Europe's growth rate? Settle in, thats the new normal". Yet the thread, since its inception is only focused on the current market, and has never abstracted or even thought about what the post-"correction" will mean for their lives. I thought people knew what the post-correction market would look like, and were either pretty confident (rightly or wrongly) figured they'd survive with their job and savings, or just didn't even want to talk about it because the whole topic is incredibly depressing and scary. At least it is for me. I mean, from what little I know, housing prices suddenly cratering would cause a huge shock in the construction industry, laying off lots of people. Interest rates go up, but that doesn't necessarily mean houses become any more affordable. You see people defaulting and forfeitures like you have in the US and the housing crisis lingers, with no central industry to lean on to employ people, and with most governments stuck in austerity mode like it's 1932, the malaise lingers and the Canadian economy takes a long time to recover. Dreylad fucked around with this message at 14:29 on Dec 16, 2014 |
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Dec 16, 2014 14:23
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eXXon posted:What's a Pearson percentage? No, man, it's a percentage based off how badass YYZ the song is. (100% badass)
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Dec 16, 2014 15:10
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Kalenn Istarion posted:So, if I'm reading this right, Hal was just using 'theta decay' to refer to monetary deflation. I'm struggling to parse his post because of the excess of And the terrible grammar. There are extraneous words and punctuation marks all over his posts. Makes it very difficult to parse.
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Dec 16, 2014 15:55
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Well guys, thanks for reinforcing the vague sense of terror I have for our collective future, between climate change and the economic climate E: what I mean to say is that we really need to get our heads out of the sand. And even if we do, there's no guarantee a significant portion of the rest of the population will care to anyways
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Dec 16, 2014 16:26
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Mederlock posted:Well guys, thanks for reinforcing the vague sense of terror I have for our collective future, between climate change and the economic climate Haha yeah same here. Guess I'll just keep working making somewhat-OK money and die poor in a ditch somewhere.
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Dec 16, 2014 16:27
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Mederlock posted:Well guys, thanks for reinforcing the vague sense of terror I have for our collective future, between climate change and the economic climate As an expert in the field let me tell you, things just get worse and worse and there is nothing you can do about it. My greatest ambition at this point is that my eventual death will be quick or at least not too painful. You're from Canada so I hear hypothermia isn't that bad.
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Dec 16, 2014 16:40
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http://www.theprovince.com/news/fraser-valley/Park+protest+eyed+Surrey+booming+Clayton+Heights/10525688/story.htmlquote:A Surrey neighbourhood is so upset with a proposed reduction in on-street parking that some residents are considering physically blocking construction. Here's the road from the article:  This is dumb as gently caress on the resident's part. They know when they move in that the street they're on is going to have X amount of parking spaces and that the road is destined to be a major thoroughfare. The gravel should be obvious as hell. When my parents went and bought a place in Surrey in a newly-developed area, the parking on the major road nearby disappeared after a year or two them moving in. These idiots bought homes inadequate for their needs and expected for the status quo to be kept on the right of way.   Also knowing the area, these homes have to have adequate parking for at least two vehicles. What the gently caress are they keeping in their garages? Their life sav... oh yeah probably not that. The suburbs need to die and I hope these idiots get what they deserve. Also from their petition site: quote:THIS PARKING PROBLEM IS NOT THE FAULT OF CLAYTON RESIDENTS!! Yeah. Like hell you did not know this would come. Also note the real estate ad at the bottom. Lain Iwakura fucked around with this message at 16:53 on Dec 16, 2014 |
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Dec 16, 2014 16:44
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I really, really loving hate people whining about a lack of free parking on the street. gently caress off, I've never even lived in a place where you don't have to pay for parking. It's not some god-given right.
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Dec 16, 2014 17:04
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AVeryLargeRadish posted:You're from Canada so I hear hypothermia isn't that bad. I came close to dying of hypothermia a few months ago, believe me, it's easily one of the worst ways to die unless it sets in very fast. You just lie there, thinking about everything you ever hosed up.
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Dec 16, 2014 17:08
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PT6A posted:I really, really loving hate people whining about a lack of free parking on the street. gently caress off, I've never even lived in a place where you don't have to pay for parking. It's not some god-given right. Totally. The suburbs, and the hysterical, entitled car culture of entitlement that goes along with it needs to die in a fire.
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Dec 16, 2014 17:30
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 The impression I get from this poll is the statement "define debt". Online polls are of course malarky but I have to wonder what level of truth there is here. Of course in my case I have voted no because all of my gifts have been bought with cash. I do not recall the last time I used my credit card for a physical purchase either.
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Dec 16, 2014 17:38
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Rime posted:I came close to dying of hypothermia a few months ago, believe me, it's easily one of the worst ways to die unless it sets in very fast. You just lie there, thinking about everything you ever hosed up. Sounds like every night when I try to get to sleep or any moment not occupied with something else to distract myself.
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Dec 16, 2014 17:51
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tagesschau posted:Day-to-day work in the markets doesn't actually imply that you are an expert on macroeconomics. I've never claimed to be a macro expert. I've only spoken to market mechanics as an expert, where I've spent every day of the largest part of my career, and I still get shouted down from time to time. MickeyFinn posted:And the terrible grammar. There are extraneous words and punctuation marks all over his posts. Makes it very difficult to parse. At least I wasn't the only one who thought that. I stand by my original guess that he's an algo trader or something like that.
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Dec 16, 2014 18:04
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David Corbett posted:Nice analogy, but what's the fourth horseman? The problem is the government has already been operating on a semi-austerity if not full on austerity budget for years, despite the massive deficts. The government already cut 28K public service jobs and on April 1st there may be like 10k more, and those austerity cuts are already hurting the Tories bad.
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Dec 16, 2014 18:06
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Reminds me of my old home town of Milton, Ontario. It essentially turned into the fastest growing town in Canada in the early 2010's which just means "hey lets try and cram as many suburbs onto major roads before we start adding lanes and improving major infrastructure". One artery of a suburb was closed off from a major street because the people who moved in to the copy/paste style homes complained to no end on how having so many cars drive through their neighborhood was "a threat to their children", who I assume wandered the streets unattended like the coyotes from the nearby abandoned farmlands right across the street.
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Dec 16, 2014 18:13
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AVeryLargeRadish posted:As an expert in the field let me tell you, things just get worse and worse and there is nothing you can do about it. My greatest ambition at this point is that my eventual death will be quick or at least not too painful. You're from Canada so I hear hypothermia isn't that bad. I'm already pretty convinced that the trifecta of resource depletion, ecological damage and economic fuckery is going to make the remainder of this century deeply unpleasant. That's likely to include one or more Great Depression-level events, probably a bunch of civil and international wars, possibly on the scale of WWII, and maybe even a few local nuclear exchanges. It's also likely to include the shedding of various bits of technology and infrastructure we currently take for granted. Yet, even with all that, it is extremely unlikely that we'll be looking at the annihilation of all life on Earth, the extinction of homo sapiens, or even the complete collapse of modern civilisation. The future is the 1930s and 40s all over again, not Mad Max. That's likely to be extremely lovely, but the vast majority of people alive during that time made it through without dying prematurely1. You personally still have a pretty high chance of living to be 80-1002. And hell, it's all you can hope that your death will be quick and painless, but even with all of our technology and medicine today, that's fairly unlikely. You think Rime's description of dying of hypothermia sounds bad? Try dying of cancer or Alzheimer's. You will die at some point, and odds are it's gonna be a terrible experience.  As for the world itself, it is going to be a steadily shittier and shittier place, and that is all our and previous generations' fault. It's natural to grieve about that, and most people, faced with that realisation, go through a fairly classical Kübler-Ross process. But the sooner you move on from your current depression and into acceptance, the sooner you can get on with the task of making things slightly less lovely for your future self, friends, relatives, country, and the world. 1 Regional exceptions apply. See Russia, Jews in Europe, etc. 2 OK, maybe less if you're an unfit blob of a goony-goon, in which case it's not too late, join TFLC now!
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Dec 16, 2014 18:35
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Mederlock posted:Well guys, thanks for reinforcing the vague sense of terror I have for our collective future, between climate change and the economic climate While there are no doubt challenges ahead,improvements to make and some bitter pills to swallow, I'll let you in on a little secret when it comes to economics and markets in general, which is Things are never as good or bad as they seem. Especially in threads like this where there are clearly so many people emotionally invested in their desired outcomes. Saltin fucked around with this message at 19:03 on Dec 16, 2014 |
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Dec 16, 2014 18:59
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It's a little bizarre to see posters who wouldn't trust Ben Bernanke if he said the sky was blue, applauding Hal_2005's walls of financial jargon. They must be reacting to the tone rather than the content. I have a pretty strong background in econ and a bit in finance and I can hardly discern much a point out of any of it. This post in particular seems like total gibberish to me: Hal_2005 posted:The 4th horseman is bail-ins. Where the system itself no longer has enough liquidity or pledgable assets to give for repo markets to function properly. The only reason the TALF and TARP programs worked was because the Federal Reserve was able to offer money for all forms of toxic debts and their overlying swaps/derivs/clo's that let people trade and give credit on their gross balance sheet strength vs. their net balance sheet strength. A "bail-in" for those who don't know is when a distressed bank or other financial institution is recapitalized by imposing losses on shareholders and bondholders. I.e. a bailout but using private money instead of taxpayer dollars. If that sounds fairer and less open to moral hazard than the taxpayer-funded bailouts of 2008, that's because it is. The legal and regulatory mechanisms to carry out bail-ins didn't exist in 2008, but since then there's been a great deal of work to prepare for them. That's what the first sentence and the last link mean. The bit in the middle has nothing to do with bail-ins. The second sentence appears to be describing a liquidity crunch, not a bail-in, which if anything is a tool for preventing liquidity crunches. I don't follow the markets so I don't know what he's referring to with "blowouts" "semi-hourly market breaks" or "STRIPs" except to say with 100% confidence that they're unnecessary jargon. Nor do I know anything about Canadian investment funds blowing up this weekend, or what that has to do with the Greek bond market, except that I have no idea how we got there from "bail-ins." On a side note, if anyone would be interested in a global financial governance thread, I just finished writing an essay for a class on the topic so I would totally try to contribute/could do the OP if there's enough interest.
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Dec 16, 2014 19:04
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