Macro and Other Musings discovers an excellent paper on low interest rates and bank risk.
Basically, they talk of low interest rates meaning low short term interest rates. In a production model, these interest rates reflect growth of retail inventories, and low interest rates cause producers to borrow this money for production, borrowing from the consumer's pot. What we have is an example of supply chain interference that result in channel distortion. Low interest rates imply a deflated state, fewer stages of production. Some investment banks and producers continue to act as if in an inflated state.
To decorrelate the banking and production chains, part of the low interest borrowing are designated for Kelly trades, trades designed to bet against oneself, thus covering the quantization error.
The optimum banker strategy is simple, compute the quantum short term period (longer in a deflated state), then compute the target interest rate before market action. Then sell or buy bank notes in the new, longer short term structure. Use standard statistical equalization theory to get a short term rate that makes a normal curve (trying to account for negative terms).
Well, or else, just decommission centralized banking.
In other words, target the banker's term structure as a finite dimensional production line. In a severely constrained economy, target a term structure looking like the goods term structure of the constrained goods. Constrained goods always hold the most information about the future.
Thursday, January 7, 2010
A good essay on primitive Keynes
From the independent Institute. The main point here is that price is not a level, it is a distribution. If that distribution of prices is distorted, then Keynes aggregate macro does not work. Stimulus will only make the prices more distorted because the constrained resource is actually now the unused resource. So if we suffer an oil shortage, Keynes would have us burn more oil.
HT peter Gordon
HT peter Gordon
Wednesday, January 6, 2010
Egad!
Hubble is Freaking about thisA STAR primed to explode in a blast that could wipe out the Earth was revealed by astronomers yesterday.
Requantizing Europe
An interesting discussion at Martin Wolf's site. It is this tendency toward a production line that haunts Europe.
The problem is universal in information theory. If there is a Europe, then there are likely seven things Europeans react to about Europe. But there are about nine things Europe wants to say. The production line solves the mismatch, allowing excess information to be aggregated, producing the same pleasant outcome with lower transaction rates and larger lot sizes. The round off error tends to roll around the peripheral countries in normal times.
The problem is universal in information theory. If there is a Europe, then there are likely seven things Europeans react to about Europe. But there are about nine things Europe wants to say. The production line solves the mismatch, allowing excess information to be aggregated, producing the same pleasant outcome with lower transaction rates and larger lot sizes. The round off error tends to roll around the peripheral countries in normal times.
Voter choose bankruptcy for California government
Says a Rasmussen poll:
"Sixty-seven percent (67%) of male voters say it’s better to let California go bankrupt, a view shared by 45% of women.
Nearly two-thirds of both Republicans (66%) and voters not affiliated with either party (64%) say bankruptcy is the better option. Democrats are evenly divided on the question.
Voters have taken a dim view from the start of the bailouts proposed for General Motors and Chrysler and for the financial industry.
A plurality (38%) of voters nationwide say the $787-billion economic stimulus plan has hurt the economy."
And this:
"If the election were held today, we'd lose the House," Democratic campaign consultant Tom King told the Huffington Post this week, expressing a view that HuffPo says is echoed by a number of Democratic strategists in off-the-record conversations."
This is the result of liberal irreversibility in government programs. Bankruptcy is the only method available for government reform. For the average voter, the consequences of major government failure are positive. This is severe bad news for government stimulus makers. In other words, this Obama thing is not working out, too many constituents are in the pork line for bailouts.
Tuesday, January 5, 2010
Some technology news
UK Telegraph says driverless cars will be on the road in ten years.
Red Orbit tells us about an RFP for the taxi of tomorrow.
WattWatt has the latest in electric auto technology.
Fiat signs on to Windows Mobile for their autos. Microsoft trying to get a piece of automotive technology.
The New Yorker says Mayor Bloomberg is returning with a congestion proposal.
Red Orbit tells us about an RFP for the taxi of tomorrow.
WattWatt has the latest in electric auto technology.
Fiat signs on to Windows Mobile for their autos. Microsoft trying to get a piece of automotive technology.
The New Yorker says Mayor Bloomberg is returning with a congestion proposal.
Monday, January 4, 2010
Oil imports still dropping
Our share of global oil is likely still being quantized lower. Could be good or bad news, depending upon your view. I would not invest in retail gasoline outlets at the moment.If efficiency causes us to use less oil, then this number should be stabilizing: Better efficiency, better precision, less change in trend use of a scarce resource due to better planning.
Ezra Klein is confused on California
"California is in a total fiscal crisis. It's had to slash state services to the bone and will have to cut further. It's gutted the University of California and lost its credit rating." Says Ezra.
Yes, and I can verify that in my local neighborhood, over half the households expect their income paid from the property taxes of the less then half remaining. It has always been this way, mainly because people like Ezra Klein design irreversible government programs.
So, yes, California will default, but the main blame are the liberals who have not discovered reversibility in government programs makes change smooth. For example, my cost of raising the valuation on property taxes is zero up to 2% a year. The cost of evaluating down in a property slump is about $1,000 in bureaucratic costs. Hence, Ezra and his ilk have designed in bankruptcy as the mechanism of change.
Where does California go for a bailout?
"California's political leaders, who are facing the daunting challenge of closing an estimated $20.7 billion budget deficit this year, are looking to Washington for help. Just don't call it a bailout."
Naturally, go see Ezra's pals in Congress, at which point they can make irreversible decisions that will crash later,
Yes, and I can verify that in my local neighborhood, over half the households expect their income paid from the property taxes of the less then half remaining. It has always been this way, mainly because people like Ezra Klein design irreversible government programs.
So, yes, California will default, but the main blame are the liberals who have not discovered reversibility in government programs makes change smooth. For example, my cost of raising the valuation on property taxes is zero up to 2% a year. The cost of evaluating down in a property slump is about $1,000 in bureaucratic costs. Hence, Ezra and his ilk have designed in bankruptcy as the mechanism of change.
Where does California go for a bailout?
"California's political leaders, who are facing the daunting challenge of closing an estimated $20.7 billion budget deficit this year, are looking to Washington for help. Just don't call it a bailout."
Naturally, go see Ezra's pals in Congress, at which point they can make irreversible decisions that will crash later,
Beat the Press needs to hire someone who has heard of the Oil Bubble
Here Beat the Press seems to think there are no scarcities! If there were no scarcities, then we could have gone on building houses until there was a scarcity.
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