Thursday, 8 December 2011

Why I oppose Financial Stability

Financial Stability became a topic in the late 1990s, at a time of peak laxity in international financial supervision. The same minds which promoted the Financial Stability Forum (now the Financial Stability Board) also crafted the deeply flawed and destructive Basel II.

I have never understood why Financial Stability should be an objective of public policy. Desirable, measurable outcomes of benefit to the public should be the objectives of public policy. Stability is a silly and impractical goal in a capitalist economy. Success and failure of competitive firms are the basis for economic progress, capital allocation and market pricing. Capitalism requires recognition of failure, and failure always causes economic loss and some instability as past assumptions are re-examined and re-assessed more objectively in light of current painful reality.

The management of failure can contribute to better future outcomes, but only if the costs of failure are born by those who caused the failure and not by those innocent of it. The 1990s policies promoted by regulators during the Great Moderation aimed to forestall failure by disguising it, delaying it, and subsidising it. Since the collapse of securitisation and inter-bank credit markets in 2008, governments have been too willing to socialise the costs of failure (by then magnified with leverage) to taxpayers through serial bailouts.

One strength of the US banking system from the 1930s to the 1980s was that failures were dealt with quickly and certainly. Foreclosed properties had to be sold by banks within two years of repossession, leading to a quick and certain reallocation of assets from failed borrowers to new owners. The FDIC swiftly and mercilessly shut down failed banks. New owners - often buying at distressed prices - were encouraged to invest in making the assets productive and profitable. It was this simple recycling from failed managers to better managers that was largely behind the short recessions and strong recoveries during this period of American economic history. With forbearance now institutionalised at all levels of the US economy, we are seeing Japanification instead of recovery. And it is even worse just about everywhere else where dominant banks are much more influential.

Financial Stability - like national security - can never be objectively confirmed as achieved. It is more often used to disguise the ulterior aims of its proponents, or to misdirect attention in aid of bad public policy that harms rather than promotes the public interest. For example, the Greenspan Put was a brilliant mechanism for ensuring financial stability by preventing any adjustment of the markets in response to the S&L crisis or dot-com bust. The Bernanke Put and Paulson Plan were financial stability solutions to the securitisation fraud crisis that revealed the undercapitalisation of global banks and over-leveraging of real estate. Bank bailouts and special liquidity facilities were financial stability innovations to prevent mark downs of mis-priced and illiquid capital assets.

Rather than review whether massive financial deregulation and promoting concentration in a few incumbents was in the public interest, the Greenspan Put, Bernanke Put, liquidity facility innovations and public bailouts have disguised misallocation of capital by pumping the markets with taxpayer funds and monetary laxity whenever they began to flag. Financial Stability initiatives have therefore taught incumbent bankers that any disruption is an excuse to double down on bad bets as the central banks and state treasuries would flood enough cash to make bad bets come good. MF Global made this bet, and although it (and its clients) won't be collecting, I expect the creditors/counterparties that seized all its collateral assets expect to come out way ahead.

I oppose Financial Stability because it is the most misleading banner for a set of bad, harmful and expensive public policies protecting bad executive management and preventing recognition of realistic market outcomes.

So what would I promote instead? Resiliency and resolution. Resiliency means the ability to withstand stresses and shocks which will unavoidably arise in global, competitive markets. Resolution means the dispersion of assets to creditors - and competitors - when banks fail, in hopes the assets and enterprises will be better managed by other managers than the same ones that led the bank to failure. Together these two principles - if made the basis for public policy - would do more to restore sanity to global banking than anything else I can think of. Resiliency will favour more and better capitalisation, with a focus on marketable assets with transparent price discovery (e.g., traded on transparent markets and recorded on balance sheet). Speedy and certain resolution of failed banks will make management and shareholders conscious of the risks of failure falling first on them, then on unsecured creditors and bondholders, and never on the taxpayer.

We are a long way from adopting principles of resiliency and resolution, as demonstrated by the EU's continued efforts to forestall defaults while protecting incumbent managements and bondholders. Our policy makers continue to chase the chimera of financial stability, and make bad policies worse along the way.

31 comments:

  1. Heartily agree - but the time for writing about it is over.

    Pledge: whatever these clowns buy, we'll sell more of.....until they give up, or are forcibly removed.

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  2. Carter the Examiner8 December 2011 13:13

    Terrific. As a former fairly senior regulator, I can't agree more.

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  3. Brilliant simply brilliant.

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  4. Anyone have any specific advice / recommendations on buying physical gold (i'm in the UK and Scandinavia).

    many thanks

    cp

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  5. I'm sorry, but i prefer stability.
    A car designed for stability protects the occupants. A car designed for resiliance protects itself. I'd rather drive the former.

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  6. OK where to start…

    Hello LB. Rich H here. (aka Miss America to the RGE crowd that may stop in at your sand box)
    Long time no hear. I see you are still cross-pollinating on the RGE. I enjoy my retirement from writing. (Truth is, I still go back and re-read my old articles regularly and marvel at the accuracy and forethought they contained. To boot, I don’t think that anything new needs to be written because I feel like the topics I covered 3 years ago, apply still 100%, and many of the solutions I proposed still are what is needed. I’m sure you must think the same of much of your old work?)

    I don’t give a crap if this is tooting my horn or not… Especially when I read new stuff that is just being uncovered in the markets (by writers, blogers, news orhgs, etc…) …and I think. WOW, that’s almost identical to crap I wrote about 3 years ago.

    Anyhow here goes my commentary on your piece.

    (In my best Hulk voice...)
    Stability bad! Instability Good!!! Hulk Like!

    In theory, I agree. In my first RGE article I even stated: “Failures are NECESSARY to establish Risk vs Reward, and thus provide the free market its price discovery.”

    …but the truth is… with the interconnected market, and perma growth model, fractional banking multiplied by investment leverage… ...all fueled with monopoly retirement money (pension / 401k, etc), and future promises (limitless Govt/corp bonds that can be issued to be paid some time in the future)…

    …well… … …. the truth is, there just isn’t enough money in existence! …and without massive intervention, manipulation, etc… the entire system would INSTANTLY COLLAPSE!

    There is no “speedy and certain resolution of failed banks” ….because there is no buyer. There is no bank! …and the taxpayer is S.O.L. since their bank account is wiped out.

    There is no unscrambling this egg. The markets grew way out of control. Far larger than could be serviced. (I really nailed it with this piece: http://www.economonitor.com/blog/2008/12/merry-x-mess-happy-2000000000009/
    )

    There is no resiliency… because there is no bank or country that can financially survive right now without government intervention. …and in order to avoid cascading defaults, they save them all. …and if they didn’t save them all, (because none of them could survive without bailouts) then which ones would you save??? (talk about crony capitalism!!! I know you appaul it. You practically coined the phrase. but picking survivors or parameters that would decide what to save would be decided in 100% cronyism fashion.

    To quote an argument I had with Nouriel…
    “The alchemy world of finance moved well beyond it sustainable existence. If the financing of finance can’t be covered somewhere between par and the existing interest rate, then it’s not functioning properly! The fact that we let it grow to 30-40% of GDP was an enormous mistake, and that extraction from the net credit/money supply needs to be covers via bailout/printing or it needs to be realized/destroyed.

    With that said, interest rate increases would potentially destroy the market. (…and would likely destroy much of the 30-40% overgrowth) …but maybe they won’t? The reality is, I need to eat tomorrow, and somebody needs me to do something for them and so on… The world will still exist. …and regardless of the outcome for the rigged market, it is better to rebuild it correctly, rather then patch up a system that has failed us because its seed of alchemy can grow so large through all the “captured” pieces of our system”

    So with this said… either destroy the system and rebuild…
    or maintain and hold people accountable… as I said here: http://seekingalpha.com/instablog/405552-rich-hartmann/134622-the-united-states-of-accountability

    All the best.
    RH/MA.

    p.s I didn’t even proof read this, so I’m sure its pretty poorly written and amazingly scatterbrain.

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  7. atleast cite nassim taleb if you are gonna rip off his speech

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  8. To further your metaphor, one might say the the roads have been designed to promote stability, but we are all careening about too quickly in overburdened, cumbersome, shoddy vehicles. Accidents happen.

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  9. How does one apply the principle of resolution to bankrupt nations?

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  10. Financial stability is an unfortunate objective, agree. But using resilience and resolution risk replacing something vague with other vague terms.
    The key is to ask why this became an objective in the first place. This was primarily because central banks became obsessed with inflation targeting, and therefore we got this segregation of tasks which frankly is blurring what their purpose is.
    Central banks should be the guardian of the monetary system, and as long as banks issue liabilities accepted on par with cash, the job of the cb is to preserve the trust in the currency, i.e. making sure that the issuers of money are safe and sound, and that the real value of the currency is preserved.
    There is now a greater awareness of this among central bankers, and a recognition that "the art of central banking" require a more broad based approach than just inflation targeting or financial stability.

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  11. But the current definition of financial stability is explicitly not zero failure (living wills would be rather useless if that was the case); it may have accidentally been that in the early 2000's because regulators underestimated both the probability and impact of failure, but that was not intentional. This article would have been useful 5 years; now, it is ill-informed.

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  12. If we are talking about one or two failures, then I agree. Even if we are talking about an S&L crisis, with lots of small failures, you are still right. The problem comes when enough systemic banks fail, or are close to failing, at once. Then there are no competitors willing to take the assets at any price. Now you might argue, and I would agree, that the answer is to have fewer if any systemic banks, and to regulate those so they are very very unlikely to fail, assuming that the latter is possible; again, I would agree. But the fact remains than in the situation the authorities found themselves in post Lehman there were too many asset potentially being liquidated and too few buyers.

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  13. It is necessary for the Too Big To Fail banks to be downsized (i.e. broken up via trust-busting) first. I love the idea. I wish the author had mentioned this part of the equation.

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  14. Resilience and resolution are the outcome of utter transparency in the financial system.

    When banks have to disclose on an on-going basis their current asset, liability and off-balance sheet exposure details, there is no place to hide risk or bad assets.

    As a result, you get the resilience and resolution you are looking for.

    With regards to the bailouts..., to a very significant degree they reflect the fact that the regulators do not want to admit just how badly they did at protecting the financial system.

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  15. Very useful article. I would add the key point that is not often discussed is ask any capital markets type "how much leverage can you put on an asset?"; the likely response is "it is inversely proportional to volatility or some measure of extreme loss". Basically, the result of lowering systemic volatility is an increase in leverage and a reduced ability to deal with shocks when they come. This is the mess the world is in now and there are no easy answers. That is why I believe too much stability is a bad thing.

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  16. @ John
    If "stability" means incumbent bias, as I suspect, then it may not be your stability that the authorities are concerned about.

    @ Anon 21:56
    I was unaware of any speech Taleb gave on this topic when I wrote this, but would welcome a link to post as an update.

    @ Anon 22:18
    "Resolution" of bankrupt nations typically starts with default on unsustainable debts. As someone at FT Alphaville reminded us a few months back, Germany defaulted three times in the last century, each time recovering and growing strongly afterwards.

    @nbtgm1
    I agree that the scope of central bank activity has grown much too wide and ill-defined - and almost completely lacking accountability. Largely this is because democratically elected politicians have proven inept at addressing difficult economic choices, and few have been willing to challenge the laxity or largesse of presumed "experts" at the central banks. There needs to be a first principles re-examination of roles and responsibilities in a balanced, market economy.

    @ Anon 22:41 and 22:51
    It remains a fact that no EU country has allowed a bank to fail with losses to depositors above the insurance limit and unsecured creditors/bondholders - with the exception of Denmark (Amagerbanken) and the UK (Southsea Investment and Mortgages). Denmark and the UK are outside the eurozone, obviously, although this should not be a determining factor in moral hazard.

    @ Anon 22:59
    I thought of proposing that any resolution break up the failed bank into at least three units for sale to promote better competition, but have not thought this one through enough. I agree some trust-busting or limitations on M&A are needed to downsize dominant institutions and promote competition.

    @ Richard
    I strongly agree that transparency is central to improved performance and accountability. Most of the innovations of the past 25 years have been aimed at creating information asymmetries to the benefit of core market participants, impoverishing everyone else. I'm thinking in particular here about market fragmentation as more trading moved off-exchange, and derivatives - which have been instrumental in disguising performance since first abused by Japanese banks a generation ago. These information asymmetries have driven the inequalities on returns on investment between financial and non-financial enterprises. Better transparency would deliver better allocation of capital throughout the economy, and better outcomes for non-financial firms and individuals.

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  17. Ebenezer Scrooge9 December 2011 12:21

    "Resiliency" is indeed better than stability, but is much easier said than done. A resilient financial system will not panic globally if things get weird locally. But what if the system panics anyway? You've then got no choice but to head for stability--system meltdown won't do.

    And resolution isn't all that easy, either. There is a pretty broad consensus that ordinary insolvency law won't work for financial firms.

    Give me plausible details on resiliency and resolution, and I'll gladly abandon stability.

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  18. (part 1)
    OK where to start…

    Hello LB. Rich H here. (aka Miss America to the RGE crowd that may stop in at your sand box)
    Long time no hear. I see you are still cross-pollinating on the RGE. I enjoy my retirement from writing. (Truth is, I still go back and re-read our old articles regularly and marvel at the accuracy and forethought they contained. To boot, I don’t think that anything new needs to be written because I feel like the topics we covered 3 years ago, apply still 100%, and many of the solutions we proposed still are what is needed. I’m sure you must think the same of much of your old work?)

    I don’t give a crap if this is tooting my horn or not… Especially when I read new stuff that is just being uncovered in the markets (by writers, blogers, news orgs, etc…) …and I think. WOW, that’s almost identical to crap I wrote about 3 years ago. Congrats on waking up 3 years later!?!?!

    Anyhow here goes my commentary on your piece.

    continued...

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  19. (Part 2)
    (In my best Hulk voice...)
    Stability bad! Instability Good!!! Hulk Like!

    In theory, I agree. In my first RGE article I even stated: “Failures are NECESSARY to establish Risk vs Reward, and thus provide the free market its price discovery.”

    …but the truth is… with the interconnected market, and perma growth model, fractional banking multiplied by investment leverage… ...all fueled with monopoly retirement money (pension / 401k, etc), and future promises (limitless Govt/corp bonds that can be issued to be paid some time in the future)…

    …well… … …. the truth is, there just isn’t enough money in existence! …and without massive intervention, manipulation, etc… the entire system would INSTANTLY COLLAPSE! So their wouldn't be "failures" of say... a couple of banks here and there. No. There would be complete systemic failure. Banks and Governments alike.

    There is no “speedy and certain resolution of failed banks” ….because there is no buyer. There is no bank! …and the taxpayer is S.O.L. since their bank account is wiped out.

    Careful what you wish for????

    There is no unscrambling this egg. The markets grew way out of control. Far larger than could be serviced. (I really nailed it with this piece: http://www.economonitor.com/blog/2008/12/merry-x-mess-happy-2000000000009/
    )

    So in my eyes, there is no resiliency… because there is no bank or country that can financially survive right now without government intervention. …and in order to avoid cascading defaults, they are forced to save them all. …and if they didn’t save them all, (because none of them could survive without bailouts) then which ones would you save??? (talk about crony capitalism!!! I know you appaul Cron-Cap! You practically coined the phrase. but picking survivors or parameters that would decide what to save would be decided in 100% cronyism fashion too.

    To quote an argument I had with Nouriel… (where he was suggesting saving specific banks and nationalizing others... I argued the size of the system as a whole has become the problem.)

    “The alchemy world of finance moved well beyond it sustainable existence. If the financing of finance can’t be covered somewhere between par and the existing interest rate, then it’s not functioning properly! The fact that we let it grow to 30-40% of GDP was an enormous mistake, and that extraction from the net credit/money supply needs to be covers via bailout/printing or it needs to be realized/destroyed.

    With that said, interest rate increases would potentially destroy the market. (…and would likely destroy much of the 30-40% overgrowth) …but maybe they won’t? The reality is, I need to eat tomorrow, and somebody needs me to do something for them and so on… The world will still exist. …and regardless of the outcome for the rigged market, it is better to rebuild it correctly, rather then patch up a system that has failed us because its seed of alchemy can grow into such a large forest through all the “captured” pieces of our system”

    So with this said… "some" failures will destroy the system.

    Do we want that? Destroy it and rebuild…

    Or maintain the ponzi-ish system and hold people accountable for their destructive extremes…

    as I said here: http://seekingalpha.com/instablog/405552-rich-hartmann/134622-the-united-states-of-accountability

    All the best.
    RH/MA.

    p.s I didn’t even proof read this, so I’m sure its pretty poorly written and amazingly scatterbrain.

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  20. Aren't banks are much larger and much more interconnected now than they were from 1930 to 1980? After all, Lehman's bankruptcy introduced such disruption to the financial system that we thought everybody could go down, even the stronger and more conservative banks.

    If so, then resiliency could well mean that we need to force large banks to break up, and then very vigorously enforce antitrust provisions. Perhaps stability, as the author defined it, may be the more practical of the two solutions. I'll take either one, frankly, so long as people outside the financial sector are protected.

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  21. @ Rich

    Yes, you were (and probably still are) a genius, and I too sometimes go back and re-read the stuff you posted back in the day.

    And what you and others say about the need to prop up the entire system because the whole thing now balances on a cliff edge has some truth - although given high levels of concentration I often think the timing of market crises is the result of collusion rather than chaos.

    None of that changes what the future aim should be - to devise a system where capitalism functions as it should do to drive productive investment with market determinations of prices/profits/growth. Lenders should be responsible for their loans, and take the consequences of default or asset impairment. Letting central banks make judgements about who loses and when leads to crony capitalism and banks as welfare queens.

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  22. Part 1
    Thanks for the “genius” ego boost. Sincerely. I wish I was. I am sharp, and you probably sharpened me more than anyone else. Yourself and a group of other are on a pedestal I place very high. My self education/awareness was ramped up to try and impress/compete with the likes of you and the other regulars at the RGE. (to date, only Nouriel (pre2009) and Hellasious might rank higher. That includes, Buffetts’, Gross’s, Shedlock, etc…)

    In my simplest terms, I still 100% say (as a FACT, since I am not just knowledgeable about this, but as a first hand witness) that this is the timeline / chain of events that set this thing in fire.

    #1 – 401k …Simply put, saving for your retirement was no longer done in a “savings account”. Savings at 3-5% for the masses was no longer acceptable. …and the flood of “guaranteed” weekly subscription cash/credit from payrolls grew and grew from the early 90’s when this process really started taking hold. (Started in the 80’s, but the 90’s are when this exploded) In 10 short years, the DOW exploded fro 1,000 to 11,000 providing retirees 11% returns, and providing a ponzi-market system with a CONSTANT base (new buyer) This new cash led to Dot-com and housing bubbles, but it was really a 401k bubble! …and it is still 95% of the current support for the system. (bundle Pension funds, Mutaul Funds, etc whenever I say 401k)

    #2 – Cross-pollination, commingling. In order to find homes for all this new cash, Mutual Funds, Fund of Funds, grew large and ate up everything. …and as we learned years later, the safety in mixing all this together, equally led to the viral cascading downfall.

    #3 - The EU. In the same fashion, cross pollination was now going nation to nation. (…and as I stated so many times in the past… WITHOUT TREATIES!!! No cross border protection/guarantees/etc… UGH!!!) This massive commingle led to the repeal of Glass-Steagall. Yes. I’m blaming the EU

    #3a – Deregulation – I’ve long blamed Graham/Leach/Bliley (or Clinton) for the repeal… but let’s face it, you know how banks work! When 1 bank offers “xxxx” all the other banks are forced to do the same or better. The repeal of the Glass Steagall act was put in to keep American banks competitive with this new EU monster! The EU banks with a new larger base, and no leverage (or Fractional reserve) restrictions were now able to start profiting off of this massive influx of retirement savings (paper wealth). So the US had to follow suit to keep up. 10% FraxRes with no investment leverage could not compete with 0% FraxRes and unlimited leverage. The multiplier becomes big and quick, and US banks had to rush to keep up.

    (continued)

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  23. Part 2
    #4 – Overgrowth / Complexity – This lead here. The most knowledgeable person I worked with at BNY was lucky if he knew or understood 10% of the business. This complexity lead to so much financial innovation that not only could the people in the companies keep up (let alone the mouthpiece CEO’s, etc) that there was no way for regulators to police this either. It became deregulation thru innovation.

    #5 - securitizations went nuts! With this as a new model, there was no stopping this machine. Hedge Funds pushed the envelope, and now banks had a new target to keep up with.

    This led to my favorite term…. Evaporflation! Yes, as these banks, brokers, etc, rinse lather and repeated, they now controlled the money creation process. They became the creators of 97% of money in existence, while governments were creating less than 3%. This led to the most unbelievable understatement of money supply, and with every day, week, month, year it compounded itself. As fake money supply grew on the heels of 401k base and multiplied itself, things like commodities, salaries, etc should have done the same. …but they didn’t because of the understatement!!!!

    #6 – Fruad / extraction / retirement / etc… This fake overstated wealth was now buying stuff like never before on promises of payment tomorrow. As this fake wealth leaves and consumes, it literally disappears from the grid. …and it was allowed to continue and still continues today because the world doesn’t want to know the truth! …and thru fear of cross contamination and likely collapse, bailouts have become the necessary norm to keep our system functioning. (with the fraudster get to keep extracting that wealth.)

    #6a The market has 100% became the wealth of a nation, in paper form, rather than the production of the nation! (or innovation, progress, etc… of the nation) Our retirements are 100% married to it. Every function of life in our credit cycle is now married to it, and forced to support it.

    #7 Capture - This market capture, has led to societal capture, political capture and media capture. Education and knowledge would help unwind it… but do we really want systemic collapse?

    That’s it in a nutshell.

    (continued)

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  24. Part 3 (finale)
    What to do? (never complain if you don’t have a solution yourself!)

    #1 – Set up proper regulations and controls, and THEN you let the free market operate. (Financial innovation should always be fully disclosed, regulated, etc prior to becoming part of the system) This includes a massive overhaul to the investment concept. Much like casino’s (ironic as the market became) the market should not operate with the same dollars that are used to buy milk and eggs. Investments (for example, money you give to Goldman or a hedge fund…) should operate in the exact same manor as it would operate within an actual casino. A broker should have a chip equivalent, thus forcing this gaming system to operate at sustainable levels since they wouldn’t want to over leverage themselves. (the free market would implode those who play to aggressive.)

    #2 – Principal Reduction. (yes for the masses) The debt that was written was too much! Haircutting the banks debt, but not haircutting the public’s debt that is supporting that debt reduction through bailouts has led to and ongoing recession that will not end until the public has reached a sustainable level of debt. (either that or a massive raise in salary)

    #3 – Alt-energy / sustainable lifestyles. This is so self explanatory!!! (Even rethinking things like retirement!!! With life expectancies rising, how do you expect to live free for 30 retired years??? Especially on the wealth that you built on fake 11% annual gains? I hate to tell a 65 year old to “grow up”?!?!?)

    #4 – Education (more than anything… engineering!!!)

    OK… I’m done for the next 2 years.

    “All the best”, RH/MA


    p.s. Life is good here. Baby # 3 arrived (surprise) 3 months ago. Likewise, I’m no longer running operations, and have moved to the front office side. It’s widened my view. …but left my “views” unchanged. Drop me an email and I’ll discuss more. Hope all is well on your front.

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  25. @ Rich
    I could quibble with the history, but broadly agree that demographic bubbles and putting everything in play as part of the leverage stream created a huge monetization bubble.

    People used to buy a house at 25, pay it off at 50, live in it until they died. They would save for retirement in bonds and equities that just sat there earning income for decades.

    Income stagnation led to remortgaging the house to increase consumption, and maybe buying houses two or three with any equity left over. Repo/securities lending/collateralisation put all those bonds and equities in the 401k in the shadow banking finance stream.

    Everything was monetized several times over to peak leverage. Now it unwinds. We don't yet know if it will be the long, depressing unwind of Japan or the quick, brutal unwind of Argentina.

    All is good here. I've just sent out my Christmas cards today, and am grateful for my friends and family. I'm also still working at delivering a better banking system for the longer term.

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  26. WOW!!!

    I should proof read my stuff!

    "Leads" vs "led"
    "In" vs "on"
    Then/than

    ...and English is my 1st and only language.

    I apologize
    RH/MA

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  27. Glad to hear all is well.

    Do you still like blogging? I read the stuff, but I really try to detach because I just can't get past it becoming so fictiscous.

    My favorite analogy is still comparing the market to "pro" wrestling. ...and being a savvy market "expert" isn't much different than being an expert on said wrestling.

    To sit and have a rational discussion on who is better: Andre the Giant of Hulk Hogan is the same to me as discussing Greece vs General Electric.

    (google my name in quotes, and the letters "T" "M" "P" "G" ...and you will find what I deem my best piece I ever did. I've had it mostly removed from the www because of reasons I can't discuss, but there is a version or 2 of it out there.)

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  28. @ Rich

    It's easy to see why that post would get you into hot water, especially if you extrapolate it beyond USTs to every asset class, and then further extend it to securities lending/repo fail to delivers.

    It's always been customary for banks to recapitalise themselves after bad proprietary losses by looting pensions and other passive investments under management. It makes sense that there has been so much recent consolidation in asset management if this practice is widespread.

    Happy holidays!

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  29. "Financial stability" is merely a euphemism for "extend and pretend." We can't value assets at anything resembling market because that would cause financial instability. Consequently, we hock everything to preserve a fiction that has become so fragile, it's looking like Voldemort in his final confrontation in the last Harry Potter movie.

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  30. Este blog é uma representação exata de competências. Eu gosto da sua recomendação. Um grande conceito que reflete os pensamentos do escritor. Consultoria RH

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