European banks sitting on GBP16.3 trillion of troubled assets may suffer massive losses, The Daily Telegraph reports, citing a confidential Brussels document.
European Commission officials have estimated that impaired assets may amount to 44pc of EU bank balance sheets. The Commission estimates that so-called financial instruments in the trading book total £12.3 trillion (13.7 trillion euros), equivalent to about 33pc of EU bank balance sheets. In addition, so-called ‘available for sale instruments’ worth £4trillion (4.5 trillion euros), or 11pc of balance sheets, are also added by the Commission to arrive at the headline figure of £16.3 trillion.
No no, Hakim Sahib. The problem is not a "misapplication of math" by ingenues / sorcerer's apprentices. The problem is more fundamental.Raja Bose wrote:Basically as it stands...no matter how sophisticated the model...it works within a very restricted domain and list of assumptions. Ignoring them leads to what we are seeing now. As far as most are concerned it is still largely random behavior where prediction guarantee is worth as much as a Paki Rupee.
, or the real estate bubble and the infrastructure bubble and the L&T at a P/E of 72 bubble , ICICI at ridiculous prices bubble ? Ol' Vina was hollerin about 'em hiyar and also had to get into running fights with Sensex at 25K boosters, who had theories on "de coupling" , on "hidden value in subsidiaries waiting to be unlocked".. etc This reminded me of an excerpt from Nassim Nicholas Taleb's book "The Black Swan", about the difficulty in arriving at precise assumptions regarding forecasts and projections. Its difficult enough in hard sciences let alone where outcomes are determined based on free will.Raja Bose wrote:If we get to a stage where Math is able to mimic reality with 400% reliability....then everything will be deterministic...might lead to end of human civilization!
Basically as it stands...no matter how sophisticated the model...it works within a very restricted domain and list of assumptions. Ignoring them leads to what we are seeing now. As far as most are concerned it is still largely random behavior where prediction guarantee is worth as much as a Paki Rupee.
......This multiplicative difficulty leading to the need for greater and greater precision in assumptions can be illustrated with the following simple exercise concerning the predictions of the movements of billiard balls on a table. I use the examples as computed by the mathematician Michael Berry. If you know a set of basic parameters concerning the ball at rest, can compute the resistance of the table (quite elementary), and can gauge the strength of the impact, then it is rather easy to predict what would happen at the first hit. The second impact becomes more complicated, but possible; you need to be more careful about your knowledge of the initial states, and more precision is called for. The problem is that to correctly compute the ninth impact, you need to take into account the gravitional pull of someone standing next to the table (modestly, Berry's computations use a weight of less than 150 pounds). And to compute the fifty-sixth impact, every single elementary particle of the universe needs to be present in your assumptions! An electron at the edge of the universe, separated from us by 10 billion light years, must figure in the calculations, since it exerts a meaningful effect on the outcome. Now consider the additional burden of having to incorporate predictions about where these variables in the future.
..........Note that this billiard ball story assumes a plain and simple world; it does not even take into account these crazy social matters possibily endowed with free will......
In a dynamical system, where you are considering more than a ball on its own, where trajectories in a way depend on one another, the ability to project into the future is not just reduced, but is subjected to a fundamental limitation. Poincare proposed that we can only work with qualitative matters - some property of systems can be discussed, but not computed. You can think rigorously, but you cannot use numbers. Poincare even invented a field for this, analysis in situ, now part of topology. Prediction and forecasting are a more complicated business than is commonly accepted, but it takes someone who knows mathematics to understand that. To accept it takes both understanding and courage
Ramana saar - There are some clues. See here for exampleramana wrote:OK I get the US economy in doldrums. But why is the EU in this mess? They werent known for such exuberance or creativity. Now looks like UK and EU are in greater per captia mess. How is it possible?
During his trip, Mr Greenspan visited the Bank of England’s monetary policy committee. He told them the US financial system had been resilient amid the bursting of the internet bubble. Share prices had halved and there had been massive bond defaults, but no big bank collapses. Mr Greenspan lauded the fact that risk had been spread, using complex derivative instruments. One of the MPC members asked: how could this be? Someone must have lost all that money; who was it? A look of quiet satisfaction came across Mr Greenspan’s face as he answered: “European insurance companies.”
If Taleb has said this, then it is utter nonsense.And to compute the fifty-sixth impact, every single elementary particle of the universe needs to be present in your assumptions! An electron at the edge of the universe, separated from us by 10 billion light years, must figure in the calculations, since it exerts a meaningful effect on the outcome. Now consider the additional burden of having to incorporate predictions about where these variables in the future.
If that is true even 10-day weather forecasts made today would not have been possible. Econ-gurus of all kinds talk from their Musharaffs.Rumors first had it that Paulson bailed out AIG so strongly and speedily because GS was at the other end of many of AIG's CDSes. Now the story gets murkier and turns out that had AIG gone under, GS would have suffered but that was small fry compared to the effect it would have on Europe's banking and insurance sector.Singha wrote:AIG has recorded a astonishing quarterly loss of $60 billion and will need more life support.
......
truth will slowly leak I expect,,,
Only thou could have done it O Brown sahib!GORDON BROWN hopes to forge a partnership with President Barack Obama in Washington this week, to call for a “global new deal” to lift the world out of recession.
Obviously, UKstani coffers must be overflowing with tax revenues despite the golimaro bailouts.As he prepares for his first White House visit since the president’s inauguration, the prime minister has hinted that he is ready to make further tax cuts to boost the UK economy.
Brown sahib is indeed ze new mahatma for the 21st century. Anybody who disagrees is a communal-fascist-right wing-hatemonger onlee.The prime minister will borrow from the rhetoric of Franklin Roosevelt, who introduced the government-financed New Deal to tackle the US Depression of the 1930s. He will argue that his 21st century “global new deal” will also require public spending on a huge world-wide scale.
Writing in The Sunday Times today, Brown calls for “universal action to prevent the crisis spreading, to stimulate the global economy and to help reduce the severity and length of the global recession”.{Dass the famed stiff upper hip talking, no doubt}
His stress on continued economic “stimulation” will increase speculation about next month’s budget. No 10 sources said that, while no final decision had been taken about further tax cuts, the prime minister would do “whatever it took” to pull the UK out of recession. {Failing which he will pull a miracle recovery out oif his musharraf just in time to save the UKstan and hence the world}
I am an Indian, and I don't believe that. Even a abridge readings of Puranas would never lead a person to believe that. Well you might not like me bringing in our Puranas into the discussion whilst you bring Adam Smith's discussion. Maybe you will entertain Arthasastra into the discussion. Kautilaya underlying suggestion through out his work is the usage of spies. It is very clear Indians like other humans on this planet do not think humans are always honest and decent. Your assessment is wrong.One of the biggest problem with indians is that they want to believe that humans are honest and decent (without external pressures). I think that is naive..
Did I say we were superior to others? Did I bring in spirituality? Reading my posts or others, whatever makes you say that?Another problem with Indians is that they want to believe in spiritual or moral superiority.
Please do not confuse yourself with the concept of Karma and Himsa. Indian Mythological history does have a lot of Himsa with the Devas trying to kill the Asuras and the two greatest wars in Ramayana and Mahabharata.ss_roy wrote:Another problem with Indians is that they want to believe in spiritual or moral superiority. I think that such beliefs border on the delusional.
Let me explain with a few examples.
The Haber-Bosch process that produces the vast majority of nitrogenous fertilizers in the world was mainly funded by germans who wanted to be independent of chilean saltpeter for their chemical/ agricultural industry. Without that process WW1 or WW2 would not have been possible.. but neither would the green revolution. Would a culture that believed in ahimsa ever get to developing this process? Ironically food shortages would kill more people in the ahimsa-loving culture than the himsa-loving culture. So ahimsa ends up killing more people..
I am an Indian, and I don't believe that. Even a abridge readings of Puranas would never lead a person to believe that. Well you might not like me bringing in our Puranas into the discussion whilst you bring Adam Smith's discussion. Maybe you will entertain Arthasastra into the discussion. Kautilaya underlying suggestion through out his work is the usage of spies. It is very clear Indians like other humans on this planet do not think humans are always honest and decent. Your assessment is wrong.
How so? I am not a fizzy-cyst or anything but know that individual predictions for 1 object versus statistical models for an agglomeration of objects are very different - for example, I can predict with greater accuracy, what a group of molecules can do such as a glass of water versus what an individual molecule will. To get an even better example - I heard this on NPR (don't remember the source)- BBC conducted a survey of respondents at a fair who were asked to guess the weight of a bull, (and not its excreta!) the average of a 1000+ responses was amazingly close to the actual value.Bade wrote:If Taleb has said this, then it is utter nonsense.And to compute the fifty-sixth impact, every single elementary particle of the universe needs to be present in your assumptions! An electron at the edge of the universe, separated from us by 10 billion light years, must figure in the calculations, since it exerts a meaningful effect on the outcome. Now consider the additional burden of having to incorporate predictions about where these variables in the future.
Taleb is quite right in his billiard ball analogy. The keyword in your objection is that "exact calculation" can be made for a "large number of ensembles". But what of a specific event taken in isolation ? Let us assume I toss a fair coin. Over many tosses, you can safely say that the number of times I get a heads is roughly 50%. Precise enough answer. What of a single toss ? What are the factors you would consider ? How much force I used to flick the coin, where in the air I caught it, air resistance, temperature, humidity, windspeed, the contour of my palm... the list is endless. What does windspeed depend on ? Temperature of a neighboring city maybe. Cloud cover, time of the day.Bade wrote:I did not understand your question.
In any case, the analogy with electrons that Taleb draws on is confusing and misplaced. For point like particles, say electrons exact calculations can be done and measurements made as an ensemble of large number of events. 'Bhabha scattering cross-section' is an exact calculation and there is no need to take into what electrons at the edge of the universe are doing, when you do your electron-electron scattering measurement in a lab sitting on earth.
The problem is with inappropriate use of analogies from physics being used out of context and little meaning.
Our ability to model and predict aggregate behavior in a reasonably accurate manner, says nothing of our ability to predict and model the behavior of isolated events. I can predict with reasonable accuracy and confidence that it is going to be hot as hell in chennai in June. Why waste time and money sending up satellites and develop weather models ? Or conversely, is our inability to predict the trajectory of a cyclone with meters of resolution, preclude our ability to predict that it will rain over a large area ?Bade wrote:If Taleb has said this, then it is utter nonsense.
In any case, the analogy with electrons that Taleb draws on is confusing and misplaced. For point like particles, say electrons exact calculations can be done and measurements made as an ensemble of large number of events. 'Bhabha scattering cross-section' is an exact calculation and there is no need to take into what electrons at the edge of the universe are doing, when you do your electron-electron scattering measurement in a lab sitting on earth.
Singha wrote:UK = iceland + nuclear weapons => too big to be allowed to fail
where have we heard this before?
Some Banks Must Die So the U.S. Economy Can Live: Caroline Baum
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Commentary by Caroline Baum
March 2 (Bloomberg) -- In the government’s rush to stabilize the financial system, get the U.S. economy moving again, craft bailouts for institutions and entire sectors of the economy, and re-craft bailouts that aren’t doing the trick, the voices of limited government have been all but silenced.
In Washington, the GOP has been shamed into submission. It’s not that Republicans don’t see a role for the government in the economy, says Karl Rove, former adviser to President George W. Bush, in his weekly op-ed column in the Wall Street Journal. It’s just that they don’t see the same role as the one envisioned by President Barack Obama.
That role, laid out in his first budget last week, will be larger than at any time since 1945. Government spending is projected to soar to 27.7 percent of gross domestic product in fiscal 2009, which ends in September, according to the White House Office of Management and Budget. That compares with an average of 20.4 percent over the last 30 years.
In an era when we’ve all become interventionists -- when doing something, anything, is preferable to doing nothing and risking being blamed for any outcome -- it’s good to hear a few voices pointing to the danger of government overreach.
Historical evidence suggests that “bad government policies are responsible for causing great depressions,” write Timothy J. Kehoe, professor of economics at the University of Minnesota, and Gonzalo Fernandez de Cordoba, professor of economics at Universidad de Salamanca in Salamanca, Spain, in “The Current Financial Crisis: What Should We Learn from the Great Depressions of the Twentieth Century?”
Future Shock
It turns out the source of the shock, be it internal or external, that triggers a depression “is less important than the reaction to the shock by the economy and, in particular, the government,” the economists write.
Before you dismiss Kehoe’s views as those of a card- carrying libertarian, consider that he was trained as a Keynesian, is a “lifelong Democrat, voted for Obama,” and believes in universal health care, he tells me in a telephone interview.
The talking heads like Cramer, probably dont understand the problem, or understand it anyway and are just looking to protect their interests. The problem with american economy is much more fundamental. All this "consumer spending stimulation" will just create one last gasp before the economy gets its 72.John Snow wrote:It will not stimulate the Housing market but it will stimulate consumer spending on white goods etc and the disposable income for existing mortgage holders decreases.
