That's a great report by Prof. Saez. I recall reading several one-to-one correlations a year or so ago (I'll try to hunt down the graphs on these) concerning the rise in wages of Chinese workers between the ages of 20 to 29 years, and the same percentage drop in wages of American workers, aged 20 to 29 years, for the year 2007.
The second one-to-one correlation existed between the rise (really, an explosion) in American CEOs and senior management salaries and perks and the correlated drop in patents awarded to American citizens.
The obvious super-concentration of wealth normally bodes ill for real progress. One need only observe recent history: the connection between the widespread education boost from WWII's GI Bill, and the technical/industrial consequences from the NASA/Apollo Moon Project (utilizing the educated talent via that WWII GI bill).
How about chaos theory instead? ;) Let me guess, anyone who disagreed with the fundamental premise got a F in the class.
Anyone bother to point out if he could make that sound even remotely sensible, he would get a salary of $250k base hired by Wall street...whereas if he just stuck with Physics he would be lucky to get a $40k Post Doc salary?
That's why the deflations of the 1950s were beneficial.
I suspect the longer term structural problems with debt are better shown in the chart that Tim Iacono occasionally posts, of the CS-CPI, i.e., CPI where the Case-Schiller housing index replaces owner's equivalent rent. As of last month, that was at -8% and still declining iirc.
I don't think we'll be out of the woods on the longer term structural issues until that bottoms -- and that may be a few years away.
There should be a little image somewhere to the book, The Black Swan.
but I think it's pretty good in explaining some of these problems in English...
But the problem is he kind of condemns all things shaped like a Bell Curve, but trying to explain these types of mathematics in English is no trivial task...
So, one cannot say the entire modern finance system is based on Gaussian distributions, but one can say, a whole buttload of CDOs sure as hell were and the model sure as hell looks mathematically as well as empirically invalid.
I read the book and thought "what an asshole!" frankly, someone I just don't think would be too fun at parties...
kind of goes on big rants against the machine and to me, turns into some of the noise itself...
but I do not think there is a better book (assholes can have genius level insight) to explain conceptually some of these problems.
After being a veteran of many inflation vs. deflation debates, I'm coming around to the idea that it doesn't really matter all that much.
What matters is debt levels, which are still near all-time peaks.
I'm agnostic on the subject of deflation, but for different reasons than Robert. I'm agnostic because I don't think that mild deflation is necessarily a bad thing.
down the road. I get the impression they are trying to make the derivatives "work" and somehow be "untoxic".
Here's my question, was TARP even necessary? Yes some major financial institutions would fail but was it really Economic Armageddon as claimed?
Well, I do not want to put words into Prof. Warren's mouth here, but just watch that Morning Joe clip because this question is asked and watch the body language, squirm.
Right now it's like "oh it worked, yippee, it's all good" but to me it delayed and then on the consequences, is it truly the end of the world if Citigroup goes under?
There was going to be an effort to clean up balance sheets and separate out the toxic assets. There was to be some unwinding of positions, and that was why we had to pay those obscene salaries and bonuses to people who created the mess in the first place. I have never understood why the American taxpayer has to stand behind what is a global problem, nor why some portion of the toxic assets cannot just be put up for bid to see what banks or nonbanks are willing to pay for them -- let these "too big to fail" pools empirically learn the magnitude of the risk they took. The US taxpayer should not be standing behind the speculation of multinational businesses. Let them fail just a little.
I think you're right on deflation. On "bottoms", which bottom? The "trough" bottom caused by the financial meltdown or the ongoing bottom caused by economic structural problems? ;)
I'm staying agnostic on that one, there are too many scary things going on toxic assets being kicked down the road, still sitting there as potential bombs, the entire CRE market, the plain absurdity of saving the Zombie banks yet leaving all of the smaller and regional banks, who did nothing wrong, hanging out to dry, as well as foreclosures, unemployment.
But it appears Helicopter Ben did a few things right here.
class. I had a teacher (PHD candidate) who was doing his thesis on using an equation that tried to predict the movement of atoms and apply it to predict the movement of interest rates. We spend half a semester on this equation.
Now that I thought about this I will check to see if he ever finished his research. Something tells me it didn't work.
I believe it's static, i.e. a normal bivariate, gaussian distribution and a lot of this was so they could number crunch (right o, hey Wall Street, heard of super computers?)
hence, in a gaussian distribution, time invariant, the crash and burn effect would be in the tail and minimized in probability...(way down there or up there in the bell curve).
(say like a bunch of liar loans and mythical people and say overinflated prices and people signing up for $500k loans on $9/hr "salary, etc.) would still be way down in the tail and it's value minimized, regardless of it being more closely to the "norm" in a Gaussian distribution.
Anywho, I still say the thing that freaks me out more is the correlation coefficient being based on CDSes....to me, that's the nutso thing most of all.
I mean you're sitting out here in the peanut gallery, commenting on how our government is busy offshore outsourcing your career field and treating even the most advanced skills like disposable diapers..
you start reading about this stuff...
you go out and be a mathematical tourist and venture into the land of structured finance and find SHIT on the first pass read!
Ya know what I thought....geeks revenge on wall street.
Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers' shipments for June, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $975.8 billion, up 0.9 percent (±0.2%) from May 2009 and down 18.0 percent (±0.5%) from June 2008.
Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,350.0 billion, down 1.1 percent (±0.1%) from May 2009 and down 9.8 percent (±0.4%) from June 2008.
Are distribution functions. They are basically conditional probability marginal distribution of the time to default for security A and then security B. The original paper on the above formula and then these are something from advanced probability and statistics...
If mortgage A defaults, what's the chance of mortgage B defaulting and believe this or not, but gamma is based on CDSes which is a pure violation, they are not 1:1 and not correlated to actual default of underlying asset, their payout of default since they are traded..i.e. underlying asset goes bust, but one could payout 1 million CDSes on just that one asset and their evaluation is decoupled from the underlying asset value as well...
how GS made out like a bandit frankly. (unless of course AIG was allowed to not pay out 100% on their CDSes).
That is a very good question on percentages, which if you want to take it up to do some data analysis on the trade deficit over time, we'd love to read it.
I think the individual national trade data is on the site, I know I've read a breakdown of trade per nation somewhere.
dunno about Germany, france main trading partners.
the post on Copulas. We're having our own little chat here but I hope to let others read this stuff who do not "speak math" else, it's kind of like two people speaking a foreign language at a party.
that gamma as I recall is CDS values at the end of market..
which also would destroy the validity of a Copula.
Yeah, first time I looked over any of this stuff but I am like gee wiz, this crap isn't even valid for mathematical modeling.
I went through this here and if you search on Copula should find more...
but I was arguing solo because ya know who the hell can read that?
First is the change significant? 2.4B out of 124B is something like 2%, 3.5B out out 149 very slightly more, and there seems to be more noise than that in the historical record. Now the decrease frm a year ago is clearly real, and that is definitely encouraging.
Second, where is the new increase going? Germany and France reported very slight increases in GDP that IIRC are export driven, but I think they trade primarily in the EU.
Of course, A.G. would have (past tense) argued that the destruction is creative, since we are creating middle classes somewhere else.
Frank T.
That's a great report by Prof. Saez. I recall reading several one-to-one correlations a year or so ago (I'll try to hunt down the graphs on these) concerning the rise in wages of Chinese workers between the ages of 20 to 29 years, and the same percentage drop in wages of American workers, aged 20 to 29 years, for the year 2007.
The second one-to-one correlation existed between the rise (really, an explosion) in American CEOs and senior management salaries and perks and the correlated drop in patents awarded to American citizens.
The obvious super-concentration of wealth normally bodes ill for real progress. One need only observe recent history: the connection between the widespread education boost from WWII's GI Bill, and the technical/industrial consequences from the NASA/Apollo Moon Project (utilizing the educated talent via that WWII GI bill).
there are multiple methods to post images on EP, but the lines of code to do it are displayed in the user guide.
I tried to make it simple so you could cut and paste and then just replace the example URL with the image URL you are going to display.
In your browser, right click on any image to either find the URL of it, or save it to your hard drive for uploading.
the rich text editor has an image insert button on it too. Admin forum has some additional info, tools.
How about chaos theory instead? ;) Let me guess, anyone who disagreed with the fundamental premise got a F in the class.
Anyone bother to point out if he could make that sound even remotely sensible, he would get a salary of $250k base hired by Wall street...whereas if he just stuck with Physics he would be lucky to get a $40k Post Doc salary?
That's why the deflations of the 1950s were beneficial.
I suspect the longer term structural problems with debt are better shown in the chart that Tim Iacono occasionally posts, of the CS-CPI, i.e., CPI where the Case-Schiller housing index replaces owner's equivalent rent. As of last month, that was at -8% and still declining iirc.
I don't think we'll be out of the woods on the longer term structural issues until that bottoms -- and that may be a few years away.
There should be a little image somewhere to the book, The Black Swan.
but I think it's pretty good in explaining some of these problems in English...
But the problem is he kind of condemns all things shaped like a Bell Curve, but trying to explain these types of mathematics in English is no trivial task...
So, one cannot say the entire modern finance system is based on Gaussian distributions, but one can say, a whole buttload of CDOs sure as hell were and the model sure as hell looks mathematically as well as empirically invalid.
I read the book and thought "what an asshole!" frankly, someone I just don't think would be too fun at parties...
kind of goes on big rants against the machine and to me, turns into some of the noise itself...
but I do not think there is a better book (assholes can have genius level insight) to explain conceptually some of these problems.
After being a veteran of many inflation vs. deflation debates, I'm coming around to the idea that it doesn't really matter all that much.
What matters is debt levels, which are still near all-time peaks.
I'm agnostic on the subject of deflation, but for different reasons than Robert. I'm agnostic because I don't think that mild deflation is necessarily a bad thing.
I am not very proficient at posting graphs very quickly.
Interesting, if you look at this graph and consider the decline in the manufacturing sector they appear to be heading in opposite directions.
RebelCapitalist.com - Financial Information for the Rest of Us.
down the road. I get the impression they are trying to make the derivatives "work" and somehow be "untoxic".
Here's my question, was TARP even necessary? Yes some major financial institutions would fail but was it really Economic Armageddon as claimed?
Well, I do not want to put words into Prof. Warren's mouth here, but just watch that Morning Joe clip because this question is asked and watch the body language, squirm.
Right now it's like "oh it worked, yippee, it's all good" but to me it delayed and then on the consequences, is it truly the end of the world if Citigroup goes under?
to your post. Krugman had extracted one shocking graph that shows income inequality in beyond belief increase up to 2007.
I'd really like to see those numbers for 2008-2009.
What was that about executive compensation regulation?
Hope you don't mind, but the graph really drives the point home on how working America is plain getting raped.
There was going to be an effort to clean up balance sheets and separate out the toxic assets. There was to be some unwinding of positions, and that was why we had to pay those obscene salaries and bonuses to people who created the mess in the first place. I have never understood why the American taxpayer has to stand behind what is a global problem, nor why some portion of the toxic assets cannot just be put up for bid to see what banks or nonbanks are willing to pay for them -- let these "too big to fail" pools empirically learn the magnitude of the risk they took. The US taxpayer should not be standing behind the speculation of multinational businesses. Let them fail just a little.
Frank T.
I think you're right on deflation. On "bottoms", which bottom? The "trough" bottom caused by the financial meltdown or the ongoing bottom caused by economic structural problems? ;)
I'm staying agnostic on that one, there are too many scary things going on toxic assets being kicked down the road, still sitting there as potential bombs, the entire CRE market, the plain absurdity of saving the Zombie banks yet leaving all of the smaller and regional banks, who did nothing wrong, hanging out to dry, as well as foreclosures, unemployment.
But it appears Helicopter Ben did a few things right here.
class. I had a teacher (PHD candidate) who was doing his thesis on using an equation that tried to predict the movement of atoms and apply it to predict the movement of interest rates. We spend half a semester on this equation.
Now that I thought about this I will check to see if he ever finished his research. Something tells me it didn't work.
RebelCapitalist.com - Financial Information for the Rest of Us.
Modern finance is based on a standard normal distribution. Anything that deviates from that is written off as an anomaly or noise.
RebelCapitalist.com - Financial Information for the Rest of Us.
I believe it's static, i.e. a normal bivariate, gaussian distribution and a lot of this was so they could number crunch (right o, hey Wall Street, heard of super computers?)
hence, in a gaussian distribution, time invariant, the crash and burn effect would be in the tail and minimized in probability...(way down there or up there in the bell curve).
(say like a bunch of liar loans and mythical people and say overinflated prices and people signing up for $500k loans on $9/hr "salary, etc.) would still be way down in the tail and it's value minimized, regardless of it being more closely to the "norm" in a Gaussian distribution.
Anywho, I still say the thing that freaks me out more is the correlation coefficient being based on CDSes....to me, that's the nutso thing most of all.
I mean you're sitting out here in the peanut gallery, commenting on how our government is busy offshore outsourcing your career field and treating even the most advanced skills like disposable diapers..
you start reading about this stuff...
you go out and be a mathematical tourist and venture into the land of structured finance and find SHIT on the first pass read!
Ya know what I thought....geeks revenge on wall street.
Confirms the above.
Are distribution functions. They are basically conditional probability marginal distribution of the time to default for security A and then security B. The original paper on the above formula and then these are something from advanced probability and statistics...
the "F" is usually denoted to describe probability distribution.
If mortgage A defaults, what's the chance of mortgage B defaulting and believe this or not, but gamma is based on CDSes which is a pure violation, they are not 1:1 and not correlated to actual default of underlying asset, their payout of default since they are traded..i.e. underlying asset goes bust, but one could payout 1 million CDSes on just that one asset and their evaluation is decoupled from the underlying asset value as well...
how GS made out like a bandit frankly. (unless of course AIG was allowed to not pay out 100% on their CDSes).
Actual paper here.
I cannot believe they are betting trillions in the great casino where only the "big guys" get a seat at the table on these things.
That is a very good question on percentages, which if you want to take it up to do some data analysis on the trade deficit over time, we'd love to read it.
I think the individual national trade data is on the site, I know I've read a breakdown of trade per nation somewhere.
dunno about Germany, france main trading partners.
the post on Copulas. We're having our own little chat here but I hope to let others read this stuff who do not "speak math" else, it's kind of like two people speaking a foreign language at a party.
that gamma as I recall is CDS values at the end of market..
which also would destroy the validity of a Copula.
Yeah, first time I looked over any of this stuff but I am like gee wiz, this crap isn't even valid for mathematical modeling.
I went through this here and if you search on Copula should find more...
but I was arguing solo because ya know who the hell can read that?
First is the change significant? 2.4B out of 124B is something like 2%, 3.5B out out 149 very slightly more, and there seems to be more noise than that in the historical record. Now the decrease frm a year ago is clearly real, and that is definitely encouraging.
Second, where is the new increase going? Germany and France reported very slight increases in GDP that IIRC are export driven, but I think they trade primarily in the EU.
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