11–20 of 35 posts
I think opposition started with Scott Sumner in July. http://www.themoneyillusion.com/?p=22379 Very good news. I expect to see the markets react tomorrow, ala balmer on a much greater scale.
and opposite side. The market will tank tomorrow by 1.5-2%.
I think opposition started with Scott Sumner in July. http://www.themoneyillusion.com/?p=22379 Very good news. I expect to see the markets react tomorrow, ala balmer on a much greater scale.
Earlier quoted context omitted.
Bigtime. Summers is a key proponent of the financial practices that led to the 2007 financial crisis. >Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall ... He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives http://chronicle.com/article/Larry-Summersthe/124790/
The vast majority of OTC derivatives was far less disruptive to the banking sector than your average vanilla home mortgage loan during the crisis. An overwhelming majority of all the banks that failed during the crisis had zero OTC derivatives on their books, but plenty of average vanilla home mortgage loans. Internal documents from the banks that did deal in more sophisticated financial products show that they had a…
Earlier quoted context omitted.
Bigtime. Summers is a key proponent of the financial practices that led to the 2007 financial crisis. >Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall ... He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives http://chronicle.com/article/Larry-Summersthe/124790/
The vast majority of OTC derivatives was far less disruptive to the banking sector than your average vanilla home mortgage loan during the crisis. An overwhelming majority of all the banks that failed during the crisis had zero OTC derivatives on their books, but plenty of average vanilla home mortgage loans. Internal documents from the banks that did deal in more sophisticated financial products show that they had a…
There is no way that the markets would have fallen that far and that fast if most participants, and the rating agencies, had the capacity to accurately and directly determine how much risk they and their counterparties had.
I imagine that the complicitness of the rating agencies in the whole thing never would have even gotten so egregious if most institutions had vanilla instruments on their books that were straight forward to value. OTC derivatives made it very easy to hide finagling and create an environment where rating agencies feel comfortable playing the tit-for-tat game with banks because they thought no one would notice ethical transgressions among all the indirection of derivatives.
I think opposition started with Scott Sumner in July. http://www.themoneyillusion.com/?p=22379 Very good news. I expect to see the markets react tomorrow, ala balmer on a much greater scale.
Scott Sumner ( http://www.themoneyillusion.com ) and Nick Rowe ( http://worthwhile.typepad.com/ ) have done an incredible job at helping me understand money and its role in the economy even though I have no training in economics. It's worth going back and reading their archives.
Earlier quoted context omitted.
The vast majority of OTC derivatives was far less disruptive to the banking sector than your average vanilla home mortgage loan during the crisis. An overwhelming majority of all the banks that failed during the crisis had zero OTC derivatives on their books, but plenty of average vanilla home mortgage loans. Internal documents from the banks that did deal in more sophisticated financial products show that they had a…
Not really. OTC derivatives greatly contributed to what happened because it obscured who your counterparty was in a transaction . This is really important because as the world falls apart around you, you don't know if your OTC derivatives happen to be based indirectly and at least in part on some other failing financial institution. Multiply this by everyone you do business with and you have a complete dissolution of…
This is simply incorrect. The cash flows involved in an OTC derivative are explicitly stated in the contract itself.
I imagine that the complicitness of the rating agencies in the whole thing never would have even gotten so egregious if most institutions had vanilla instruments on their books that were straight forward to value. OTC derivatives made it very easy to hide finagling...
You imagine incorrectly. Pricing most of these contracts is 8'th grade math given a specific scenario - fancy math comes into play only in estimating the probabilities of each scenario. In principle, the pricing formula is this:
price = P(housing goes down) x BIG LOSS + P(housing goes up) x MODERATE GAIN
Earlier quoted context omitted.
The vast majority of OTC derivatives was far less disruptive to the banking sector than your average vanilla home mortgage loan during the crisis. An overwhelming majority of all the banks that failed during the crisis had zero OTC derivatives on their books, but plenty of average vanilla home mortgage loans. Internal documents from the banks that did deal in more sophisticated financial products show that they had a…
Not really. OTC derivatives greatly contributed to what happened because it obscured who your counterparty was in a transaction . This is really important because as the world falls apart around you, you don't know if your OTC derivatives happen to be based indirectly and at least in part on some other failing financial institution. Multiply this by everyone you do business with and you have a complete dissolution of…
Earlier quoted context omitted.
The vast majority of OTC derivatives was far less disruptive to the banking sector than your average vanilla home mortgage loan during the crisis. An overwhelming majority of all the banks that failed during the crisis had zero OTC derivatives on their books, but plenty of average vanilla home mortgage loans. Internal documents from the banks that did deal in more sophisticated financial products show that they had a…
Wow. This is 180 degrees away from the mainstream narrative of how the crisis developed. I'm not trying to bait you or argue, but do you have any links? I'd be interested in some supporting documentation for your claim.
No offense, but it starts with having an understanding of what a derivative is and how they are used. There is nothing sinister about them in any fashion, nor were they the "cause" of anything. The mainstream, as usual, has it wrong.
At the base level, excessive risk was the problem, and because derivatives employ leverage, that risk is amplified.