See: http://online.wsj.com/article/SB10001424052748703871904575216251915383146.html
Derivatives Clearinghouses Are No Magic Bullet. Really? but not for the reason this guy gives...and he is a professor at some big Ivy league School!
I read this article with a certain sense of bemusement at the level of ignorance the author therein demonstrated. He seems to have no understanding of issues of 2-timing, N-timing in bilateral netting agreements. The issues he worries about would be addresses in centralized or interconnected hierarchical clearing system as explained in my knol and powerpoint/ youtube presentation
References:
The Holistic Theorem
http://online.wsj.com/article/SB10001424052748703871904575216251915383146.html
Showing posts with label Centralized Clearing. Show all posts
Showing posts with label Centralized Clearing. Show all posts
Thursday, May 6, 2010
Saturday, July 11, 2009
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.
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.
Sunday, July 5, 2009
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:
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:
Saturday, June 13, 2009
FT.com / Comment / Opinion - Economists clash on shifting sands
FT.com / Comment / Opinion - Economists clash on shifting sands
The neo-classical vs. neo-liberal debate as being framed here between Ferguson and Krugman has always struck by the fact that none of these positions provides clear analytic means for deciding when to decide where government (or central counterparty) action is judicious and when it is not.
While Krugman might be right at this moment, blind acceptance of his prescriptions may lead to trouble at other times.
It it is why I see my piece on the holistic theorem, despite its analytic relative simplicity as crucial in understanding how to decide among these two camps in practical situations such as the present issue of whether or not to adopt centralized clearing of derivatives.
SEE: http://knol.google.com/k/phil-kongtcheu/the-holistic-theorem/24v2kgtuvzk2v/16
The neo-classical vs. neo-liberal debate as being framed here between Ferguson and Krugman has always struck by the fact that none of these positions provides clear analytic means for deciding when to decide where government (or central counterparty) action is judicious and when it is not.
While Krugman might be right at this moment, blind acceptance of his prescriptions may lead to trouble at other times.
It it is why I see my piece on the holistic theorem, despite its analytic relative simplicity as crucial in understanding how to decide among these two camps in practical situations such as the present issue of whether or not to adopt centralized clearing of derivatives.
SEE: http://knol.google.com/k/phil-kongtcheu/the-holistic-theorem/24v2kgtuvzk2v/16
Sunday, June 7, 2009
Editorial - Congress, the Banks and Derivatives - NYTimes.com
See my knol on the "Holistic Theorem"
This editorial makes a painfully & tragically poor traditional liberal argument for derivatives regulation even though the ultimate goal of regulating all derivatives trades is what is needed. It merely re-hashes the March 29,09 editorial piece. See:http://www.nytimes.com/2009/03/29/opinion/29sun1.html
They conclude by saying:
"Senator Tom Harkin has introduced legislation that would require exchange trading for derivatives. Representative Collin Peterson has introduced a bill that would tighten the regulation of derivatives’ clearinghouses. He acknowledges that his bill is not as strong as he would like but that Congressional politics left him no choice, telling The Times, “The banks run the place.”"
and I say: "duh"
In this specific instance, they fail to see that their is a unity of purpose between derivatives trading institutions and advocates of centralized clearing, and that is the most effective argument to be made in order to effect CENTRALIZED CLEARING OF ALL DERIVATIVES TRADES.
Why set yourself up for a fight against a party where the odds of winning are against you when you can simply & persuasively explain to the other party that it is in their best interest to switch to your side of the argument?
See:http://knol.google.com/k/phil-kongtcheu/the-holistic-theorem/24v2kgtuvzk2v/16
Note also that regulated BICs exchanges on different types of underlyings, by creating exchanges that most efficiently trade instruments that all customized derivatives merely combine would eliminate the loopholes of the proposed legislation
This editorial makes a painfully & tragically poor traditional liberal argument for derivatives regulation even though the ultimate goal of regulating all derivatives trades is what is needed. It merely re-hashes the March 29,09 editorial piece. See:http://www.nytimes.com/2009/03/29/opinion/29sun1.html
They conclude by saying:
"Senator Tom Harkin has introduced legislation that would require exchange trading for derivatives. Representative Collin Peterson has introduced a bill that would tighten the regulation of derivatives’ clearinghouses. He acknowledges that his bill is not as strong as he would like but that Congressional politics left him no choice, telling The Times, “The banks run the place.”"
and I say: "duh"
In this specific instance, they fail to see that their is a unity of purpose between derivatives trading institutions and advocates of centralized clearing, and that is the most effective argument to be made in order to effect CENTRALIZED CLEARING OF ALL DERIVATIVES TRADES.
Why set yourself up for a fight against a party where the odds of winning are against you when you can simply & persuasively explain to the other party that it is in their best interest to switch to your side of the argument?
See:http://knol.google.com/k/phil-kongtcheu/the-holistic-theorem/24v2kgtuvzk2v/16
Note also that regulated BICs exchanges on different types of underlyings, by creating exchanges that most efficiently trade instruments that all customized derivatives merely combine would eliminate the loopholes of the proposed legislation
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