Black Swan Taleb: bad math and the misundersting of risk caused the financial meltdown

March 31, 2012 by · 1 Comment
Filed under: The Economy and Current Affairs 

This article argues that the crisis of 2007–2008 happened because of an explosive combination of agency problems, moral hazard, and “scientism”—the illusion that ostensibly scientific techniques would manage risks and predict rare events in spite of the stark empirical and theoretical realities that suggested otherwise.

Nassim Taleb on Value At Risk VAR

Conclusion: “The captain goes down with the ship; every captain and every ship.” Nobody should be in a position to Read more

What is Money? There’s more to it than meets the eye. From GK Research via David Hay over at Evergreen Capital Mgt.

March 10, 2012 by · 3 Comments
Filed under: The Economy and Current Affairs 

Great exploration of what money is and what it requires to remain viable. The piece covers such topics as:

  • The original philosophical difference
  • Does money need political backing?
  • Money as a common good
  • Money as an information system
  • Differentiating between money and credit
  • The costs of money
  • The external price for money—or the exchange rate
  • Money in a non-democratic society
  • The gold standard
  • Read more

Whodunit? Great books on the causes and solutions to the Financial Collapse

February 1, 2012 by · Leave a Comment
Filed under: The Economy and Current Affairs 

A year ago for Christmas I received a Kindle eReader (thank you Tammy!) and it has greatly accelerated my consumption of books. One of the subjects that I dove (continued to dive) into was the causes of the financial collapse. The conditions that contributed to our undoing, how we get out of our ongoing mess and the steps that should be taken to prevent a repeat are vitally important to our future as well as to our children and their children.

Learning from History

I have written about this myself since 2008 (see here and here for instance) and have read a number of books on the subject (see my Whodunit list down to the right on this page under Learning From History) that I thought covered fairly well the breadth of the subject and helped me refine my understanding. However I was humbled last night by a blog post on The Baseline Scenario that linked to Reading About the Financial Crisis: A 21-Book Review by Andrew Lo, a truly epic undertaking that is well worth reading on its own.

The causes are Read more

What to do about the economy.

December 3, 2010 by · Leave a Comment
Filed under: The Economy and Current Affairs 

In a comment to my FB post about the video on QE2 Sean DeButts asked what my solution would be for the economy. It’s an important question that deserves a detailed response.

Jobs are the number one thing we need to get the economy moving and jobs require capital and the willingness to put that money to work. Now …there is plenty of money around, billions and billions sitting on the balance sheets of banks and companies but it is not being put to work. Why not? Let’s look at companies first.

Companies will only invest if they think they can get a return on that investment and are confident that the rules won’t change before they can earn that return. Right now everyone knows that the deficits the US is running will lead to collapse if something doesn’t change but until what those changes will be is decided companies (and individuals) are worried that they might be singled out to pay for those deficits. That’s why I believe the National Commission on Fiscal Responsibility and Reform’s deficit reduction plan must be put into law by Congress and signed by the President. See: http://bit.ly/h1tILt for the Charley Rose interview with the co-chairs of the Commission. Read more