Wednesday, April 16, 2014
Banks and regulators evaluate the adequacy of capital requirements, the value of incentive compensation and the acceptable level of risk taking using "Value at risk" models. VAR models take each 'position' held by a bank and estimate how much risk that position faces and how much capital is needed to back it. Risks come in two flavors: Interest rate - if interest rates rise ceteris paribus the value of an asset will fall and Default - an asset which is composed of the present value of a stream of future cash flows loses some (but not necessarily all) of its value if the issuer of the asset defaults on his obligation. Each asset class has its own risk levels determined by historical regressions of variations relative to interest rates and credit rating. Critically, VAR can be substantially reduced by 'hedging' an exposed asset. You 'hedge' the risk of a default or interest rate change by paying some other entity to incur that risk on your behalf. AIG famously went bankrupt because it sold so many Credit Default swaps to banks to hedge the default risk of their Mortgage Backed Securities portfolios. Essentially what AIG did was 'rent' it's AAA credit rating to banks so that they could take BBB assets and call them AAA. By doing so, they could reduce the amount of capital that they held in reserve to protect against the possibility that these assets would default. Interest rate swaps achieve the same result for interest rate risk.
Now, there are two questionable assumptions that underly VAR: first, the key relationships between various interest rates and credit ratings will not change, either on a secular basis or at different times in the business cycle. This is critical for if something is to be 'hedged' the relationship between the entities and the assets composing both sides of the hedge have to be understood and be roughly constant. If the relationships change, for example, if it turned out that because of heretofore unacknowledged losses, AIG was BBB rather than AAA then hundreds of billions of dollars of CDSs written by AIG would instantly become valueless and the VAR models at the banks would suddenly show a massive capital gap.
Which leads to the second dodgy assumption which is that there won't be a mad scramble for the exits that results in a liquidity crisis which would distort the VAR's conclusions. In our scenario, the massive capital gap would lead the banks to dump mortgage backed securities to retrieve their position which would lead to a collapse in the value of that class of assets as the bankers pile on top of each other at the exit. Which is sort of what happened.
According to the Bank for International Settlement we have a notional volume of derivative contracts in place of $693 Trillion, others estimate it at almost twice that. Now these contracts cancel out - that's their point so that the real net value of derivatives is much smaller. For example, in 2011 it was estimated that a record over 90% of notional exposure for major US banks was 'netted' against other contracts held.
Which is good news so long as nothing untoward - what Nassim Taleb calls a "black swan" - happens to muck up that netting logic. Because a rather small shift in the 'netted' percentage could mean disaster for banks. And crucially, the VAR models assume no net change. And remember, compensation is derived from the VAR models. Which makes sense because you want to pay your bankers on the risk adjusted returns that they generate with the capital they have at their disposal.
But if the VAR systematically underestimate the risk in all of this hedging/derivative activity by ignoring the unpredictable panics and if that risk only shows up periodically during massive market meltdowns and if the big banks are bailed out by the Central Bank then bank profitability is systematically overstated which means banker compensation is too high - they are taking far greater risks than admitted and being compensated as if they were earning returns on lower risks. If the models were truly accurate, they would be taking fewer risks and earning less money all the way across the industry. Now if the biggest banks were simply allowed to collapse and their investors and employees were wiped out then this imbalance of risk would not persist - it would just be tough tacos for those who believed in the flawed models. The surviving banks would then adjust their models to be much more conservative and sales of S class Mercedes would fall.
But as with much else in our society, the baleful influence of the Federal Stupor State ensures that bankers are getting filthy rich at the expense of the rest of us. A situation that is compounded by the Fed's persistence in keeping interest rates extremely low which has been an enormous boon to banks and the individuals who control them. But it isn't surprising given that the Fed is largely controlled by...bankers. Indeed it's a brave President who goes against Wall Street. And with the accession of 'plucked dove' Janet Yellin to the Greenback Throne, President Obama demonstrates that he's not that kind of President.
Incidentally, negative real interest rates also mean that high tech millionaires rapidly become billionaires because the lower the risk free rate of money, the higher the valuation of their various tech businesses and projections. It's of course not surprising that the current President has massive support from both Wall Street and the Tech Oligarchs. They don't call him President Goldman Sachs for nothing.
So how does all this result in catastrophe? Simple but not easy: First, to bail us out of the last few financial crises, the FED has used its powers to radically increase the money supply - both to keep interest rates low and to prop the value of hundreds of billions of dollars of distressed Mortgage Backed Securities by buying them. At some point all of this liquidity injection has to go into reverse to avoid massive inflation. When Bernanke hinted that it would, emerging markets tanked which is why super dove Yellin is clinging to the conn of the USS Quantitative Easing now.
But everyone knows that there's a massive hole that this hurricane of electronic paper money is trying to cover - if there wasn't, then why the hurricane? And everyone knows that one day the hurricane must blow itself out. And everyone knows that if you're not near an exit when it does, you're dead. Because the flood surge of dollars coming from the money hurricane means that the dollar will cease to be a credible store of value and the world reserve currency. And this is the crucial point of the pessimists: the decision to remove the dollar from world reserve currency status has already been made. It was made in steps - starting with Greenspan and now likely to be completed by Yellin - the US Dollar's reign as a world reserve currency, a reign that has had great positive economic benefits for the world and particularly for the US is over. Done. Kaalas. Finis. Killed by the bankers and politicians who wanted the gravy train to continue as long as possible, enabled by a FED that is controlled by the selfsame self seeking bankers and politicians.
The result at a minimum will be a financial crisis similar in scale to those that happened in 1914, 1939 and 1971. But back then bankers were not a big part of the economy and the idea of quadrillions of dollars of derivatives had not been conceived. And of course our derivatives exposure are even more concentrated among the eight to big to fail banks today than it was in 2009. And I sincerely doubt that their VAR models or incentives have changed much if at all. And aside from writing 20,000 pages of regs and flowcharts with up to 300 steps, our 'crack' regulators are no nearer to getting control of the situation than they were before. Mostly because they are trying to manage undefined market risk on an a priori basis using negative regulatory rules which is an approach that makes GOSPLAN's record in the old Soviet Union look good.
Because of this, today the potential crash is an order of magnitude greater than the past as trillions of presumed real value evaporate in a derivative supernova. And the extermination of the dollar as the world reserve currency will not result in a replacement but in a period of confusion and chaos where Yuan, SDR, SFR, Euro, GBP, USD, Yen and most saliently, Gold enter a risk blender that will produce a concoction very unlikely to please the financial palate.
So that's the pessimistic view. And I must admit, I'm becoming more pessimistic by the day. God help us every one.
It costs more in effort, time and resources to practice medicine in a system administered by third parties. This is because there are administrative costs as well as 'agency' and 'moral hazard' costs. People don't watch their pennies when a third party is picking up the tab and the agent or doctor has an incentive to over treat because someone else pays. But the explosion of third party payment and the inevitable ruinous inflation that it drives has led just as inevitably to more and more draconian interventions in the market to limit the consequences of previous manipulations. For example, Medicaid and Medicare - utterly unable to stop outright fraud the way private insurers routinely do - has turned to Congress to criminalize more and more physician administrative errors. Obamacare adds to this coercive trend by adding a thicket of new taxes and administrative requirements to receive reimbursement such as useless but expensive medical record systems, premium taxes and so on.
So the third party 'deal' is getting worse and worse with no prospect of reversing the trend. So the primary care physicians that serve the affluent find that they can step away from the third parties, gross fewer dollars but net more and sleep better at night. They call this concierge medicine and it's booming.
This, of course adds more agony to the medical access catastrophe that the poor and working classes already face: fewer docs, higher demand, more paperwork and punishment and the coerced corporatization of physicians practices all mean fewer doctor hours to meet and treat patients in a rapidly rising 'third party, moral hazard, agency problem' filled market.
Stay tuned for more brutal Federal flailing as the gorgon gets itself more and more enmeshed in the nets of its own making. Its roars of rage will be deafening.
"I have no idea if my tax return is accurate" means 'I have no idea whether you can accuse me of a crime and destroy me"
It must be noted that since it is a crime to evade taxes that the opacity of our tax code is one of the best ways for motivated Federal Prosecutors to 'get' someone they want. In a world where no one knows whether or not they are breaking the law, the prosecutor is King. Because only the very rich can stand against the awesome power and wealth of the Federal Super State. We are betting on the discretion of a bunch of ambitious, politically motivated lawyers who don't make much money to maintain the integrity of our Republic in the face of countless opportunities to get ahead. It's a bad bet.
Stalin had a what he called a Troika to try 'anti state elements' during the Great Terror and the Great Famine. It included the Secret Policeman, the Party Boss and the Prosecutor. With the IRS, the policeman is almost inevitably a Dem and during Dem administrations the Prosecutor serves as both Party Boss and Prosecutor. The only thing we have standing between us and show trials is a rapidly eroding judiciary.
For several months now, whenever the topic of enrollment in the Affordable Care Act came up, I’ve been saying that it was too soon to tell its ultimate effects. We don’t know how many people have paid for their new insurance policies, or how many of those who bought policies were previously uninsured. For that, I said, we will have to wait for Census Bureau data, which offer the best assessment of the insurance status of the whole population. Other surveys are available, but the samples are smaller, so they’re not as good; the census is the gold standard. Unfortunately, as I invariably noted, these data won’t be available until 2015.
I stand corrected: These data won’t be available at all. Ever.
No, I’m not kidding. I wish I was. The New York Times reports that the Barack Obama administration has changed the survey so that we cannot directly compare the numbers on the uninsured over time.
The changes are intended to improve the accuracy of the survey, being conducted this month in interviews with tens of thousands of households around the country. But the new questions are so different that the findings will not be comparable, the officials said.
An internal Census Bureau document said that the new questionnaire included a “total revision to health insurance questions” and, in a test last year, produced lower estimates of the uninsured. Thus, officials said, it will be difficult to say how much of any change is attributable to the Affordable Care Act and how much to the use of a new survey instrument.
“We are expecting much lower numbers just because of the questions and how they are asked,” said Brett J. O’Hara, chief of the health statistics branch at the Census Bureau.
I’m speechless. Shocked. Stunned. Horrified. Befuddled. Aghast, appalled, thunderstruck, perplexed, baffled, bewildered and dumbfounded. It’s not that I am opposed to the changes: Everyone understands that the census reports probably overstate the true number of the uninsured, because the number they report is supposed to be “people who lacked insurance for the entire previous year,” but people tend to answer with their insurance status right now.
But why, dear God, oh, why, would you change it in the one year in the entire history of the republic that it is most important for policy makers, researchers and voters to be able to compare the number of uninsured to those in prior years? The answers would seem to range from “total incompetence on the part of every level of this administration” to something worse.
Yes, that’s right, I said “every level.” Because guess who was involved in this decision, besides the wonks at Census?
The White House is always looking for evidence to show the benefits of the health law, which is an issue in many of this year’s midterm elections. The Department of Health and Human Services and the White House Council of Economic Advisers requested several of the new questions, and the White House Office of Management and Budget approved the new questionnaire. But the decision to make fundamental changes in the survey was driven by technical experts at the Census Bureau, and members of Congress have not focused on it or suggested political motives.
Sarah Kliff of Vox says we shouldn’t freak out, because these are the numbers that the census collects for 2013, so the change is actually giving us a good baseline. But I’m afraid I’m not so sanguine. AsAaron Carroll says: “It’s actually helpful to have a trend to measure, not a pre-post 2013/2014. This still sucks.”
The new numbers will suffer, to some extent, from the same bias that the old questions suffered from: People are better at remembering recent events than later ones. Quick: On what day did you last get your oil changed? What month was the wedding you attended last summer? If it was in the last few months, you probably know. If it was someone you’re not that close to … well, the summer months kind of blend into each other now that you’re a grownup, don’t they?
And what has been happening in the most recent months? A whole lot of change! Policies were canceled, benefits changed, people shifted around their coverage in anticipation of the new law. That doesn’t make for a very good baseline. It will be a very good measure of who has insurance right now, in 2014, but it’s not where I’d want to start my 2013 baseline for our new law. That’s why they should have done this for 2012 -- or waited until 2016 -- to give us actual comparable data for the transition period. So by your leave, I think I’ll continue to freak out for a bit.
I find it completely and totally impossible to believe that this problem didn’t occur to anyone at Census, or in the White House. It would be like arguing that the George W. Bush administration might have inadvertently overlooked the possibility that when the U.S. invaded Iraq, there would be shooting. This is the biggest policy debate of the last 10 years, and these data are at the heart of that debate. It is implausible that everyone involved somehow failed to notice that they were making it much harder to know the effect of this law on the population it was supposed to serve. Especially because the administration seems to have had a ready excuse as soon as people reacted to the news.
Even if the administration genuinely believes this is defensible, why would they give anyone reason to believe that it is cooking the books? Because those charges are being made, and they’re a lot harder to dismiss than the complaints about birth certificates or dark intimations that the administration has simply made up its enrollment figures out of whole cloth.
I just don’t get it.
I mean, I can certainly think of explanations, but I can’t quite bring myself to believe the worst of them. Which leaves me with the only slightly-less-utterly-appalling conclusion: At some point, very early on in the process, folks noticed that asking the new questions would make it difficult to compare Obamacare’s implementation year to prior years, and decided that assessing the effects of the transition wasn’t nearly as important as making urgent changes to … questions we’ve been asking basically the same way for a decade and a half.
No, wait, that doesn’t make any sense, either. Let’s go back to inexplicable, shall we?
If the administration is really serious about transparency and data-driven policy, as I’ve been told for a year now, then it will immediately rectify this appalling mistake and put the old questions back into circulation double-quick. But we’re more likely going to hear the most transparent and data-driven administration in history citing these data -- without an asterisk -- to tout the amazing impact of its policies.
To contact the writer of this article:
Megan McArdle at firstname.lastname@example.org.
To contact the editor responsible for this article:
James Gibney at +1-202-624-1863 or email@example.com.
Tuesday, April 15, 2014
If this is what English educators are doing to our kids, imagine what our sainted educators are doing.
So relentless is this brainwashing that it percolates throughout the curriculum, so that even exam papers in French, English or religious studies can ask students to explain why the world is dangerously warming up, or why we must build more wind turbines. In 2012, I described an A-level general studies paper set by our leading exam board, AQA, asking for comment on 11 pages of propagandist “source materials”, riddled with basic errors. A mother wrote to tell me how her intelligent son, after getting straight As on all his science papers, used his extensive knowledge of climate science to point out all their absurd distortions.
He was given the lowest possible mark, a fail. When his mother paid to have his paper independently assessed, the new examiner conceded that it was “articulate, well-structured” and well-informed. But because it did not parrot the party line, it was still given a fail. I fear this corruption of everything that education and science should stand for has become a much more serious scandal than Mr Gove yet realises.
- Christopher Booker
Here are three charts to tell the tale. Hattip Zerohedge.com (remember, use their charts, take their opinions with a block of salt).
And after five years this looks like the new normal rather than 'muddling through'.
Get your popcorn because never will creative destruction be more entertaining.
"Self righteous and whiny is no way to go through life, son."
As helicopter parents have proliferated and hysteria over 'risk' gone through the roof, kids have turned to social media to get away from the 'dolts.
Constantly chased around by the shrieking nannies of the left and right whose idea of a 'good time' is listening to their arrogant preaching, what kids really need is not more 'guidance' or 'education' but to be left alone - they're a lot better people than you are. You self righteous creeps.
Great story on the topic here.
In the olden days Federal agencies had very little involvement in local affairs. If they needed to enforce something they went to local law enforcement. This had the benefit of making sure their actions were perceived as legitimate and reasonable because the Sheriff was accountable locally. In cases like desegregation where local law enforcement was tainted, the next step was calling out the National Guard - something that required the President to make sure the enforcement was legitimate.
But as the Federal Stupor state grew more oppressive it began to struggle with enforcement. The local gendarmes became reluctant to screw their neighbors just because unelected bureaucrats a thousand miles away said so. So now they have their own SWAT teams. BLM even has trained snipers for goodness sakes.
So as we saw in the Bundy ranch standoff we have state and local armed agents on the one side and the Feds on the other. Perhaps the Feds should step back and ask why their actions increasingly lack legitimacy. I mean if they're not sunk too deep into their Stupor state to do so.
Break it up break it all up. Kirsanow at the link with more.
The problem with progressivism is that there is no limit to the state's manipulation as long as someone can frame their coercion as either delivering a positive no matter how speculative or avoiding harm, no matter how small. Progressivism is simply fascism for the "right" reasons. Law based social conservatism tends to be same when it tries to impose national legal standards on personal choices. Both ideologies aren't interested in liberty or pluralism. Instead they seek in Buckley's famous phrase to "Immanetize the eschaton". And they don't care who gets hurt on their way to their particular heaven. After all, they're doing God's or History's work.
E cigs are safe and the best news ever for those trying to save their health and prolong their lives. The left and nanny-bitches don't invent anything or create any wealth. They just lurk like buzzards, feeding on other people's achievements and lives. And if that isn't fascism, I don't know what is. More at the link.
Yes Ira, Brandeis doesn't have to give her a platform. They are well within their rights to change their mind. But there is a big difference between recognizing a right to do something and finding it admirable.
Firstly, for a choice to be admirable it must be consistently applied - all those who are hostile to a revealed religion should be denied this platform. My guess is that Brandeis honorary degrees to those who are hostile to Catholicism or Conservative Christianity have flown as thick as a Waltham blizzard.
Secondly, it is a profound insult to publicly invite someone then disinvite them while berating their views. This is not the behavior io civilized people and it violates standards of behavior that conservatives hold dear.
Thirdly, the responsible conservative doesn't conflate two very different people in very different circumstances for the purpose of justifying the mistreatment of one. Ms Hirsi has never supported violence and her supporters don't either. Rashid Khalidi is an apologist for movements that murder thousands every year. Disinviting Hirsi - a victim of Islamic terrorism is not the same thing as disinviting it's apologist.
We all have rights. The question is who has honor. In this case Brandeis has none.
Monday, April 14, 2014
Sunday, April 13, 2014
The 'we shall overcome, the people united can never be defeated' crap has become just that. No salvation, no bright and sunny uplands of socialist joy. Just rent seekers and ward heelers and incompetence and chaos. So it is no coincidence that as the Great Left God died for liberal secularists a new more powerful God emerged. Gaia or Mother Earth isn't simply a political persuasion seeking to reorder human relations, she is the bitch Goddess of life. And anything Mummy wants Mummy gets because she says so. So the little leftist lambikins that were abandoned by their Marxist Leninist and Socialist sheperds glommed on to an absolutely iron clad cert of a bet: greenhouse gases causes the earth to warm up, people emit all the greenhouse gases, ergo people must be controlled. And who better to manipulate the masses than those old hoofers of coercion: Left/Liberals?
So the rent seekers and ward heelers got a new spring in their step and a song on their lips because once again it's "Do what I say or you'll destroy the world". Which is what every religious nut wants: an apocalypse that makes everyone do what you tell them.
Can't we get these leftist nutters a cheaper hobby? Something like popsicle stick collecting or macrame? Macrame! That's the ticket - lefties love macrame.
Not giving a damn is one of the core elements of Italian culture that makes it worth visiting.
It'd be a bitch to make a living there, though.
Farmer Bundy has won this round only because the Federales were stupid, attacking at his strongest point.
It's tough for Federal agents to confiscate a cow. But give the job to lawyers and debt collectors an Mr. Bundy will remove cattle one by one to cover his escalating forfeiture and legal expenses.
The Superstate already has most of the marbles and now they're coming for the rest.
Saturday, April 12, 2014
The 2009 Fort Hood murder of dozens by an Arab American Muslim screaming Allah akbar was classified as ' workplace violence'
Which according the Nation magazine resulted in its survivors being treated by the government as inconvenient evidence to be swept under a rug.
Say what you want about this President but he sure doesn't led concerns for the little people interfere with what he has to get done for his career. You see, they're props not people.
Details at the link.
Friday, April 11, 2014
Wednesday, April 09, 2014
Ayaan Hirsi Ali the Somali human rights champion has fought Islamism a bit too hard and praised Israel a bit too much so the totalitarian campus left have forced its objectively limp dicked President to curl into a fetal ball and withdraw the offer of an honorary degree.
Of course most Jews are just secular leftists these days so they're supposed to hate Israel and those that fight for liberty.
USAID Director Rajiv Shah is ticking off the Washington contractors who have been feeding at the USAID trough for years
Dr. Shah, who will face tough questions about his $20 billion budget in testimony to Congress on Tuesday, has set off a fierce debate over the way the agency operates and the usefulness of traditional foreign aid. Rather than pouring billions of public dollars into programs to fight poverty, the agency is increasingly using loan guarantees to get local banks to finance big projects, giving its money directly to foreign development groups and embracing projects like the “Cuban Twitter” account, which deliberately hid American involvement and shut down in failure in 2012.
To Dr. Shah, a former officer of the Bill & Melinda Gates Foundation who believes that technology and private business should be marshalled to fight poverty and encourage democracy abroad, the changes are crucial to the future of the agency. The Cuban social media project, which started in 2008, nearly two years before he arrived, was similar to U.S.A.I.D. programs, he said, which help nonprofit groups monitor elections using text messages in Senegal and Kenya.
“It’s part of our mandate to support civil society groups with modern communications and access to the Internet,” Dr. Shah said in an interview.
And he's supported by a strange coalition: from Tony Blair to Jim Inhofe. Which aside from the retention of Bush SecDef Robert Gates, makes him the first Obama appointment that I can enthusiastically approve of. He's trying to change the aid game for the better.
But Dr. Shah has influential defenders.
“Rajiv is a visionary, but deeply practical,” said Tony Blair, the former British prime minister and the founder of the Africa Governance Initiative, a foundation that works with African governments. “He realizes that the purpose of aid is for long-term development, not short-term projects that you can point to as successes.”
Senator James M. Inhofe, a conservative Oklahoma Republican who has traveled with Dr. Shah to Ethiopia, is another supporter. “I’m a huge fan of Rajiv Shah,” Mr. Inhofe said. “I’m not a fan of U.S.A.I.D., which has all these contractors waiting around at the trough. I love this guy because he is willing to take on these contractors. ”
Dr. Shah, a Detroit native and the son of Indian immigrants — his father was an engineer at Ford — held a number of jobs at the powerful Gates Foundation, including director of agricultural programs and director of financial services for the poor. He has a medical degree from the University of Pennsylvania and served only briefly in government, as an undersecretary at the Agriculture Department, before moving to U.S.A.I.D. Colleagues think that he will run for Congress someday and that his criticism of big contractors, pleasing to Democrats as well as Republicans, is at the very least politically shrewd.
Like a lot of what passes for liberalism these days the battle against the 'gender gap' is a war against human nature in the service of the cynical quest for power
What do you call a parody of a parody? Double parody? Isn't that unconstitutional? Reading the Times is a window into a form of elite dementia. Over imbibing causes cirrhosis of the brain. Friends don't let friends read the Times too much.
The rapidly decaying travesty that is the Times at the link.
Tide laundry detergent as an alternative currency. In Appalachia they use cases of coke.
Why wouldn't they use something with a higher value to weight ratio? Is it the high level of recognition? Is All a substitute?
More money laundering or should I say laundry money at the link.
"Nobody seems that interested in equal occupational fatalities, equal prison time, equal reproductive rights, or equal life or car insurance rates."