Comments on: On Animal Spririts http://alephblog.com/2009/02/14/on-animal-spririts/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Fri, 25 May 2012 21:31:47 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: But What do I Know?http://alephblog.com/2009/02/14/on-animal-spririts/comment-page-1/#comment-20966 But What do I Know? Mon, 16 Feb 2009 15:10:59 +0000 http://alephblog.com/?p=1441#comment-20966 >>>Though it may seem unduly populist, giving money to each household solves two problems: it reduces household debt problems, and it also reduces credit stress at the banks. What could be better in this environment?<<) Seriously, I was intrigued by the story and would love to get the ending. . . >>>Though it may seem unduly populist, giving money to each household solves two problems: it reduces household debt problems, and it also reduces credit stress at the banks. What could be better in this environment?<<)

Seriously, I was intrigued by the story and would love to get the ending. . .

]]> By: Lawrence Weinmanhttp://alephblog.com/2009/02/14/on-animal-spririts/comment-page-1/#comment-20956 Lawrence Weinman Sun, 15 Feb 2009 07:21:26 +0000 http://alephblog.com/?p=1441#comment-20956 "Businessmen may follow trends, but enough of them pay attention to the NCGY of their businesses that they know when future opportunities are good or bad." this is just another formulation of the efficient market thesis and if true it would mean that all stock prices reflected rational estimates of future financial performance and there would be no booms or busts. I'm with Schiller and the behavioralists on that one, So if we know this assertion is questionable when it comes to liquid financial markets where transactions are costless why would we think individual businesses, with sunk costs, bureaucracies, illiquidity, imperfect information, and high transaction costs to make major changes in strategy would be any more rational (GM, Kodak, Pan Am Time Warner, Sirius XM, citi, bear, indy mac etc etc etc ) would make decisions based on clear analysis of NCGY i think they call this a kal v'chomer :-) “Businessmen may follow trends, but enough of them pay attention to the NCGY of their businesses that they know when future opportunities are good or bad.”

this is just another formulation of the efficient market thesis and if true it would mean that all stock prices reflected rational estimates of future financial performance and there would be no booms or busts. I’m with Schiller and the behavioralists on that one,

So if we know this assertion is questionable when it comes to liquid financial markets where transactions are costless why would we think individual businesses, with sunk costs, bureaucracies, illiquidity, imperfect information, and high transaction costs to make major changes in strategy would be any more rational (GM, Kodak, Pan Am Time Warner, Sirius XM, citi, bear, indy mac etc etc etc ) would make decisions based on clear analysis of NCGY

i think they call this a kal v’chomer :-)

]]> By: Lawrence Weinmanhttp://alephblog.com/2009/02/14/on-animal-spririts/comment-page-1/#comment-20955 Lawrence Weinman Sun, 15 Feb 2009 07:15:10 +0000 http://alephblog.com/?p=1441#comment-20955 you need to read about keynes's paradox of thrift. In an economy where banks are not lending because of weak balance sheets and consurmers are not spending and therefore the velocity of money is low and the economy weak, the worst macroeconomic policy would be to increase the govt deficit and then give it to consumers only for the purpose of disinvestment....paying down the debt. The multiplier of that will be zero yet the govt debt will go up so all you have done is transfer debt from the govt (which is looking to spend it and stimulate the economy) and giving it to consumers on condition that they not use it for activity that will spur current economic activity. So more govt debt + no increase in economic activity= less tax revenues in the future= more govt debt. Given the level of household debt, the number of foreclosures and the number of people with next to no equity in their homes the likelihood such a grant would repair household balance sheets enough to spur spending is next to zero. If the goal is to stimulate the economy in the near term this is about as far from occams razor as you could get you need to read about keynes’s paradox of thrift. In an economy where banks are not lending because of weak balance sheets and consurmers are not spending and therefore the velocity of money is low and the economy weak, the worst macroeconomic policy would be to increase the govt deficit and then give it to consumers only for the purpose of disinvestment….paying down the debt. The multiplier of that will be zero yet the govt debt will go up so all you have done is transfer debt from the govt (which is looking to spend it and stimulate the economy) and giving it to consumers on condition that they not use it for activity that will spur current economic activity. So more govt debt + no increase in economic activity= less tax revenues in the future= more govt debt. Given the level of household debt, the number of foreclosures and the number of people with next to no equity in their homes the likelihood such a grant would repair household balance sheets enough to spur spending is next to zero. If the goal is to stimulate the economy in the near term this is about as far from occams razor as you could get

]]> By: Steven Miloshttp://alephblog.com/2009/02/14/on-animal-spririts/comment-page-1/#comment-20953 Steven Milos Sat, 14 Feb 2009 20:20:38 +0000 http://alephblog.com/?p=1441#comment-20953 Hi David, Excellent posting as usual. I especially appreciated your comments on behaviour, and the rationality of economic actors. As for Barry's proposal, in essence it is a tradeoff: the increased debt burden and interest (at low Treasury rates), compared to the lost utility of society in general if the null hypothesis of doing nothing and letting the deleveraging process work itself out over time. I can understand the argument: anything that limits Washington's ability to demonstrate its own special ability to economically suboptimize results and ineffeciently allocate resources is not a bad strategy. But in the end, I still would choose to muddle through, let the process work itself out, and provide the social safety net underneath. And anyways, given your current Administration, best of luck with limiting their desire to meddle in the economy. The voters have spoken...so let them enjoy the consequences. Thanks for another interesting post. Steve Hi David,

Excellent posting as usual. I especially appreciated your comments on behaviour, and the rationality of economic actors.

As for Barry’s proposal, in essence it is a tradeoff: the increased debt burden and interest (at low Treasury rates), compared to the lost utility of society in general if the null hypothesis of doing nothing and letting the deleveraging process work itself out over time.

I can understand the argument: anything that limits Washington’s ability to demonstrate its own special ability to economically suboptimize results and ineffeciently allocate resources is not a bad strategy. But in the end, I still would choose to muddle through, let the process work itself out, and provide the social safety net underneath. And anyways, given your current Administration, best of luck with limiting their desire to meddle in the economy. The voters have spoken…so let them enjoy the consequences.

Thanks for another interesting post.

Steve

]]> By: tvhttp://alephblog.com/2009/02/14/on-animal-spririts/comment-page-1/#comment-20952 tv Sat, 14 Feb 2009 15:18:49 +0000 http://alephblog.com/?p=1441#comment-20952 what happens to the average families grocery bill if .gov prints an amount meaningful enough to impact? There is no free lunch, and this risks no lunch for many. Now we place the "radioactive risk" right in basic necessities with your idea. This gives new meaning to the term "hide the sausage." Indeed, from people who want to eat. Please address these real world issues at the same time you suggest a print of helocopter money. I NEVER read from those that support a direct print and handout an aggressive and detailed analysis of its ramifications. If you disagree, I appreciate a comment detailing and defining the social risks to gifting free money in an amount that has meaningful impact on this massive problem and your rebuttal to them. It is a pet peeve of mine when I hear ideas like this that fail to address the "other side of the trade". I understand emotionally where your coming from and I appreciate that. I have great emotional pain over whats happening right now. I have trouble sleeping, literally. I rather see .gov stop propping up a failed economic model that naturally -like water running downhill- wants to self immolate. I rather go with it, get ahead of the curve, and create a Phoenix. I much prefer .gov insure all bank deposits, period. Of any amount. Protect the core for social and financial cohesion. Create communal living areas across the country in every county where jobless and or homeless have their basic needs met: food, water, shelter, clothing, and cleanliness. <---This is .govs real social contract with its people. Avoiding this fosters risk of social disolution through ramping societal acrimony/disillusionment. Include some kind of job/worker program at this site to help coordinate work with local businesses. Remove/dissolve any stigma associated with these living centers. .Gov works with the heads of VC firms and other real entreprenurs to develop national job retooling and rethinking of our economic model. VC firms are at the germination stage of business. What an excellent tool. .Gov go visit the guys out on Sand Hill Road in Stanford/Woodside, CA. Lastly, .gov and g7 stop with the free trade bull****. So long as China fails to revalue its currency, protect the environment, and pay above a slave labor wage, the US cannot compete. I am tired of buying foreign at the expense of 4.5M US manufacturing jobs lost over the past seven years. I rather my money go to helping american jobs as this deflationary depression tightens its grip on the US economy. So I buy American now. Rant/discussion off. All this will fail to happen. .Gov does everything to fix our FIRE based Humpty Dumpty economic model. Its behind the curve and most sadly and dangerously, it leaves out in the cold the "societal contract" to save its sclerotic, kleoptocratic and pseudo-oligarchic power stucture. I clearly see the societal risk that grows from this - the societal black swan as a fractal/mirror/aftershock of the financial/economic black swan gaining strength now. I disagree with your solution of free money. I added some other suggestions of my own for color. However, they can add complexity to any discussion you may wish to undertake. If you like to just stick with the print/food issue. I am happy to stay there. I greatly appreciate your blog. I read it daily among 25 others and its at the top of my list. Your solution struck a nerve with me. So I post to foster a discussion that helps both of us if yu wish to undertake. Cheers Tom what happens to the average families grocery bill if .gov prints an amount meaningful enough to impact?

There is no free lunch, and this risks no lunch for many.

Now we place the “radioactive risk” right in basic necessities with your idea. This gives new meaning to the term “hide the sausage.” Indeed, from people who want to eat.

Please address these real world issues at the same time you suggest a print of helocopter money.
I NEVER read from those that support a direct print and handout an aggressive and detailed analysis of its ramifications.

If you disagree, I appreciate a comment detailing and defining the social risks to gifting free money in an amount that has meaningful impact on this massive problem and your rebuttal to them.

It is a pet peeve of mine when I hear ideas like this that fail to address the “other side of the trade”.

I understand emotionally where your coming from and I appreciate that. I have great emotional pain over whats happening right now. I have trouble sleeping, literally.

I rather see .gov stop propping up a failed economic model that naturally -like water running downhill- wants to self immolate. I rather go with it, get ahead of the curve, and create a Phoenix.

I much prefer .gov insure all bank deposits, period. Of any amount. Protect the core for social and financial cohesion. Create communal living areas across the country in every county where jobless and or homeless have their basic needs met: food, water, shelter, clothing, and cleanliness. <—This is .govs real social contract with its people. Avoiding this fosters risk of social disolution through ramping societal acrimony/disillusionment. Include some kind of job/worker program at this site to help coordinate work with local businesses. Remove/dissolve any stigma associated with these living centers.

.Gov works with the heads of VC firms and other real entreprenurs to develop national job retooling and rethinking of our economic model. VC firms are at the germination stage of business. What an excellent tool. .Gov go visit the guys out on Sand Hill Road in Stanford/Woodside, CA.

Lastly, .gov and g7 stop with the free trade bull****. So long as China fails to revalue its currency, protect the environment, and pay above a slave labor wage, the US cannot compete. I am tired of buying foreign at the expense of 4.5M US manufacturing jobs lost over the past seven years. I rather my money go to helping american jobs as this deflationary depression tightens its grip on the US economy. So I buy American now.

Rant/discussion off.

All this will fail to happen. .Gov does everything to fix our FIRE based Humpty Dumpty economic model. Its behind the curve and most sadly and dangerously, it leaves out in the cold the “societal contract” to save its sclerotic, kleoptocratic and pseudo-oligarchic power stucture. I clearly see the societal risk that grows from this – the societal black swan as a fractal/mirror/aftershock of the financial/economic black swan gaining strength now.

I disagree with your solution of free money. I added some other suggestions of my own for color. However, they can add complexity to any discussion you may wish to undertake. If you like to just stick with the print/food issue. I am happy to stay there.

I greatly appreciate your blog. I read it daily among 25 others and its at the top of my list. Your solution struck a nerve with me. So I post to foster a discussion that helps both of us if yu wish to undertake.

Cheers

Tom

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