Comments on: A Note on the Greenspan Legacy http://alephblog.com/2008/10/09/a-note-on-the-greenspan-legacy/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Sat, 31 Jul 2010 12:01:33 -0400 hourly 1 http://wordpress.org/?v=3.0 By: Darren http://alephblog.com/2008/10/09/a-note-on-the-greenspan-legacy/comment-page-1/#comment-19301 Darren Fri, 10 Oct 2008 22:39:49 +0000 http://alephblog.com/?p=1013#comment-19301 You're absolutely right that Greenspan screwed up. But the deeper point is that we've allowed the existence of a central banking system that allowed him (and all Fed Chairmen and Board members) to wreak havoc on the economy; it's a system that should never have existed in the first place and has no place in a free society. Every government agency and intervention is the direct result of a failure caused by a previous government intervention. Austrian economists have been warning about this crash for many years, and it's likely this isn't the worst one we'll see as a result of the Fed and fiat money. Hopefully this will force economists and financial experts to understand and adopt the insights of Ludwig von Mises and Murray Rothbard. You’re absolutely right that Greenspan screwed up. But the deeper point is that we’ve allowed the existence of a central banking system that allowed him (and all Fed Chairmen and Board members) to wreak havoc on the economy; it’s a system that should never have existed in the first place and has no place in a free society. Every government agency and intervention is the direct result of a failure caused by a previous government intervention. Austrian economists have been warning about this crash for many years, and it’s likely this isn’t the worst one we’ll see as a result of the Fed and fiat money. Hopefully this will force economists and financial experts to understand and adopt the insights of Ludwig von Mises and Murray Rothbard.

]]> By: Josh Stern http://alephblog.com/2008/10/09/a-note-on-the-greenspan-legacy/comment-page-1/#comment-19264 Josh Stern Thu, 09 Oct 2008 18:28:49 +0000 http://alephblog.com/?p=1013#comment-19264 I've come around to the view that the most important problem with our regulation of highly leveraged public entities like banks, is that we don't require them to be sufficiently diversified. Sure, credit derivatives are volatile, and CDOs are hard to understand, but there is lots of other stuff out there like oil futures and the Baltic Dry Index (I think futures were just recently introduced on this but I don't know the details, it's just and example here) that one would think would be candidates for something that is easy to understand and relatively hard to turn into a bubble, and yet we've seen astonishing volatility in those prices over the last year. So given assets that can exhibit that type of vaolatility, getting rid of complexity is not going to make the leverage levels safe. Safety to operate as a leveraged entity is going to involve some combination of lower leverage, portfolio management and fungibility of asset requirements (e.g. stop loss), and high diversification requirements to better insure that assets less correlated (a big problem with the agency ratings of MBS is the assumption that housing markets in different cities would be uncorrelated). I’ve come around to the view that the most important problem with our regulation of highly leveraged public entities like banks, is that we don’t require them to be sufficiently diversified. Sure, credit derivatives are volatile, and CDOs are hard to understand, but there is lots of other stuff out there like oil futures and the Baltic Dry Index (I think futures were just recently introduced on this but I don’t know the details, it’s just and example here) that one would think would be candidates for something that is easy to understand and relatively hard to turn into a bubble, and yet we’ve seen astonishing volatility in those prices over the last year. So given assets that can exhibit that type of vaolatility, getting rid of complexity is not going to make the leverage levels safe. Safety to operate as a leveraged entity is going to involve some combination of lower leverage, portfolio management and fungibility of asset requirements (e.g. stop loss), and high diversification requirements to better insure that assets less correlated (a big problem with the agency ratings of MBS is the assumption that housing markets in different cities would be uncorrelated).

]]> By: jesse http://alephblog.com/2008/10/09/a-note-on-the-greenspan-legacy/comment-page-1/#comment-19262 jesse Thu, 09 Oct 2008 17:13:47 +0000 http://alephblog.com/?p=1013#comment-19262 Buffett and you were early in warning of problems with credit default derivatives. What do you think is the best way to unwind the "false" confidence they provided, I mean how would you regulate CD swaps ? If it became mandatory to disclose positions to an institution resembling a clearing house would that help counterparties discover a market price for their claims ? Can this be done in real time, I mean with all the frenzy surrounding the long and short CDS positions with the now bankrupt Lehman ? organize Is there anything resembling ult a these contracts Buffett and you were early in warning of problems with credit default derivatives. What do you think is the best way to unwind the “false” confidence they provided, I mean how would you regulate CD swaps ? If it became mandatory to disclose positions to an institution resembling a clearing house would that help counterparties discover a market price for their claims ? Can this be done in real time, I mean with all the frenzy surrounding the long and short CDS positions with the now bankrupt Lehman ?

organize Is there anything resembling ult a these contracts

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