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Experimental Economist Bart Wilson on the Meaning of "Fair" Posted by: ReasonTV
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By: knightschwartz. on 07 Dec 09, 12:33:09
isn't this plan to force companys to sell certain products and offer certain deals and how to write contracts flagrantly unconstinual? can someone tell me why this is not being taken to the Supreme Court?
By: glennd7962. on 11 Sep 09, 16:47:29
Of course we should. But we also need proper regulation of OTC interest rate and credit capital markets - they are currently largely unregulated, which the speaker from Reason clearly doesn't understand, nor do many of the commenters on this site. I'm a free market capitalist for sure, but applying simplistic, Utopian, anarcho-capitalistic concepts to the concrete problems of this business might sound cool, but they have no relevance to serious policy discussions about OTC derivative regulation.
By: charleshoskinson. on 11 Sep 09, 08:25:22
If the business model is flawed, then shouldn't we allow the minds he conjured it to be unemployed? The republicans and the democrats bailed out the banks that used derivatives permitting them to continue their business. Eventually they will game the system again, and you get the bill. lower regulation also means more risk, which means more conservative management. Thus, the banks wouldn't play with derivatives like CDS.
By: glennd7962. on 10 Sep 09, 06:35:07
One more fact, do you realize that the default problem isn't most correlated with sub-prime? It's most correlated with equity levels, regardless of credit quality or size of mortgage? At the root of all of this is way too easy money, and while it's problematic, the fannies and freddies are sideshows. It's all academic now, we've gone way to far down this road. We will have a bust, default, hyper inflation and then maybe some sanity. But the lack of regulation of OTC derivatives is fire fuel.
By: glennd7962. on 10 Sep 09, 06:30:51
Wow, you just don't get it, do you? I know the cause of our problems are easy money, and that both the treasury and congress are rigging the game with perverse regulations that encourage behavior that is destroying us. However, in the OTC interest rate and credit derivative market specifically, the problem was and still is that there is virtually no effective regulation. Do you know that the CDS market didn't tank because of defaults? I agree with the general point, but on this you are wrong.
By: MooseOfReason. on 10 Sep 09, 00:52:20
glennd, I'm just going to recommend you read "Meltdown" by Dr. Thomas Woods.
By: glennd7962. on 09 Sep 09, 22:22:57
Okay, one more try. This over-simplification of how the credit derivatives market is typical of what is coming from theoretical economists. I agree with the genera point, but for the last time, CDS introduce a "market risk" completely distinct from the risk of default, which was the root of the problems in the CDS market. The defaults didn't cause it. Your ignorance of this basic fact, as well as the authors, cause you both to come to the wrong conclusion.
By: TheMarketAssassin. on 09 Sep 09, 20:04:03
Washington is rigged.....I am moving
By: MooseOfReason. on 07 Sep 09, 06:41:28
It was not under-regulated. Read this article: "The Meaning of Competition in the Credit Default Swap Market".
By: glennd7962. on 06 Sep 09, 23:51:03
It's not an "ideology" like Marxism is which contains all kinds of assumptions about society, and it's dynamics. I know market economics well - I've studied them for years. Back to my original point.OTC interest rate and credit derivatives markets were way underregulated domestically as well as internationally. In many important respects they were actually unregulated, in fact. My original comment was about the CFMA of 2000, which ripped the lid off and is the root of the current deriv probs.
By: zetsway5000. on 06 Sep 09, 23:08:34
What do you mean free markets don't have a competing ideology when I just told you it a few comments ago? Government over-regulation, and interventionism creates artificial monopolies, destroys wealth, and destroys economies. There is no magic about about it, I suggest you study Austrian economics.
By: glennd7962. on 06 Sep 09, 22:54:11
More - AIG issued these synthetic CDS's from it's Financial Products division, not an insurance company. While they can be used to provide a hedge against adverse credit events - not just defaults - that is not all they were used for, It depends on which side one takes - they are no different from any other financial instrument that creates an exposure to a future price in an asset class. Insurance indemnifies one against a specific risk and doesn't have "market" risk - which was the problem.
By: glennd7962. on 06 Sep 09, 22:50:57
Again, your Hayek point is off topic, I'm saying that we need sensible regulation, not that we need a central bank or single currency. All the responses to my points have been off topic - what gives on this site?
By: glennd7962. on 06 Sep 09, 22:47:08
No it doesn't. Marx, Engels, Hegel and others CLAIMED to have discovered scientific principles about society and economics, incorporated in the 7 tenets of Marxism. They were wrong, but my point is that Free Marketeers don't have a competing ideology - we claim no insight into a "dialectic" (to use a Marxist term), rather we believe in freedom for it's own sake. Free markets are part of being free, but aren't magic. We need to protect ourselves from all kinds of problems without killng it.
By: glennd7962. on 06 Sep 09, 22:42:45
It isn't an insurance product at all, it's a "swap" of cash flows. I was in the business for 10 yrs, my question was directed at you to show you that you don't even know what one is. Example, what principal cash flows are are exchange? How do collateralization agreements work? How do you simulate future credit events to determine price within a given confidence interval? Btw, AIG was doing synthetic CDS comprised of collateralized debt obligations, btw. Finally, the business was underregulated.
By: zetsway5000. on 06 Sep 09, 21:20:58
Of course we need some sort of regulation, but we have over-regulation in this country, and almost all of the regulations do more harm then good. Communism does not assume any truth about human nature, or it wouldn't even exists as an ideology. Communism disregards human nature entirely.
By: MooseOfReason. on 06 Sep 09, 20:40:54
glennd7962, It wasn't off point. You said "Of course there is predatory lending." I gave a reason why there was. CDS, like Randazzo said in the video, means "credit default swap". It's insurance against a bond going default. Think of it like homeowners insurance if your house burns down. You get back whatever your property was worth. Hayek was against a monopoly national currency, and wrote a book about competing currencies.
By: glennd7962. on 06 Sep 09, 17:57:19
Completely off point, but true. Back to my point and for the rest of you,do you even know what a CDS is, or what AIG was doing - they created synthetic CDS out of baskets of CDO's? Be very careful when applying free market generalities to the derivatives markets. I was in the business for 10 yrs and it was rife with frontrunning, price rigging, scalping and out and out fraud - due to insufficient regulation. Free Marketeers are not absolutists. Read some Friedman or Hayek. There are limitations.
By: glennd7962. on 06 Sep 09, 17:52:53
"anyone with half a brain knows this". Wow, what a great way to substantiate your point. Clearly there is a balance between safety and the problems of government intervention but to assume that free markets don't require some kind of regulation/enforcement/referee is to misunderstand free markets. Communism assumes that it is based upon a revealed truth about human nature and society, with a scientific formula. Free markets theorists never pose this. Essentially, free markets are non-ideological
By: BrainDeadRepublican. on 06 Sep 09, 11:09:46
Seeds of the next mortgage banking crisis.
By: krayzewolf. on 06 Sep 09, 10:55:14
But you also can't spell it without me.
By: enotdetcelfer. on 05 Sep 09, 07:02:09
"Tier 1 Banks" ... ... Facepalm
By: UnusVita. on 04 Sep 09, 06:59:42
Nope and I'm screwed if I violate them, my fault, the information was there.
By: fomastephanovitch. on 04 Sep 09, 06:54:53
Big government = jobs for the dweebs.
By: MooseOfReason. on 04 Sep 09, 06:23:31
glennd7962, Rates were only that low because of the Federal Reserve. Otherwise, the rates would reflect the amount of savings in the economy, meaning rates would be much higher, because banks don't have as much to lend.