Op-Ed Contributor - The Great Preventer - NYTimes.com

Op-Ed Contributor - The Great Preventer - NYTimes.com:

Interesting piece. I am not sure whether stating that a person was actively complicit in the creation of a disaster and then participated in the rescue from the abyss is the soundest argument to make the case for them to be REWARDED. The opposing piece by Anna Jacobson Schwartz seems more coherently argumented.

Precisely with respect to BICs, when Roubini recalls that "The Fed even committed to purchasing up to $1.7 trillion of Treasury bonds, mortgage-backed securities and agency debt to reduce market rates." it once more makes me thing how much most cost-efficiently the fed could have controlled long term rates with interest rate BICs that replicate the whole curve.

I argue that the Fed making markets on interest rate BICs should be a major aspect of needed reforms at the Fed. Indeed in the 2003-2006 period, the fed had a hard time curbing the speculative bubble in the real estate market because acting only on overnight lending rates, it could not control long term rates that determine mortgage rates.

Holistic Theorem - Wolfram Demonstrations Project

Holistic Theorem - Wolfram Demonstrations Project:


The Wolfram Demonstrations project today released my peer reviewed dynamic illustration of the "Holistic Theorem" which is the basis of my unity of purpose article which argues that it is in the self interest of financial institutions to welcome mandatory clearing of financial derivatives. Its key proposition is that:
"'The more people participate in a system, the more it makes sense for a central authority to mediate their relationships/communication; no matter what the cost for setting up this central authority, as the number of participants increases, this cost is dwarfed by the benefits of centralized mediation on a linear versus quadratic basis'."

Geithner: Business Hedging Isn't Target - WSJ.com

Geithner: Business Hedging Isn't Target - WSJ.com: "Mr. Geithner's testimony Friday didn't shed much new light on details that lawmakers and industry players are clamoring to hear. Specifically, it remains unclear how regulators will determine when a contract is considered standardized. Mr. Geithner conceded the administration isn't ready to carve out a definition, although he promised it would be broad and 'designed to be difficult to evade.'"


Comment:
The question of a definition is indeed KEY.
BICs provide the best framework for providing a robust working definition. See:http://tinyurl.com/cyxhpa
With BICs markets, BICs would be the "standardized derivatives" and everything else would be composed of such BICs. It helps solve hedging ability issues that are matters of concern in this article. In addition, it in effect ensures that economic efficiency forces, in the search for the cheapest production cost, will push derivatives trades where they are cheapest, i.e. in a centrally cleared exchange system.

New Stimulus ? No Stimulus?

Bruce Bartlett, a former treasury dept economist has an article in the FT titled "We do not need a second stimulus plan"

He explains that because really stimulative programs that were part of the stimulus would only stimulate much later, there is no basis for declaring the stimulus plan passed earlier in the year was insufficient and that we need a new one.

Indeed Krugman has held a different view for a long time. So I just checked his blog and there is an entry on the article titled "Bruce Bartlett misstates the problem"

he points out the statement:

"The problem is that the Obama administration was much too optimistic about how quickly stimulus spending would affect the economy. Christina Romer, chair of the Council of Economic Advisers, and Jared Bernstein, chief economist to vice president Joe Biden, forecast in January that the stimulus would reduce unemployment almost immediately."

and points that it is inaccurate.While this may be factually true, it seems to me it does little to invalidate the central argument Mr. Bartlett is actually making.

I wish there would be more Krugman substantiation of the statement: "The problem, instead, is that the hole the stimulus needs to fill is much bigger than predicted."

I would be very interested in finding data quantifying the scope of shovel ready projects with large multiplier effects.

As I have written elsewhere projects with network effects as described in my holistic theorem would have the biggest stimulative impact, possibly at the lowest cost.

These include
-network infrastructure projects such as roads and bridges, in particular near housing developments (These would help support prices of houses in those areas by making the developments more easily accessible to urban work areas)
- internet infrastructure development projects
-electrical/smart grid development projects
-Financial Services central clearing

The question to me is how many(number and budget) can be moved along, on what timeframe,



07/09/09 - Here's the WSJ survey of economists on the question: