Mish thinks it all began with the Nixon gold shock. I think is all begins about a million years ago.
We have been doing government defaults since the beginning of time and we are getting better at it. Our real models are both the Nixon shock and the Roosevelt gold repricing, and now we know how to default with debt, thinks to sandbox theory.
Mathematics of the process has advanced quit a bit since Mish left engineering. Since 1970 we understood option pricing and now we understand double sided option pricing, we can hedge the defaults and keep the rate spike minimized.
There will be some stress, but we will have a default number and a reasonable period and a guarantee of no arbitrage opportunities. And the Fed will not be in a sudden scramble with dodo heads in charge. The math folks know this stuff and both the Fed and finance have the algorithms.
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