“money”
17 posts under this tag.
For those armchair observers of the breathtaking world of quants and structured finance, as myself, Technology Review’s current issue carries a wonderfully didactic and gripping introduction, The Blow-Up: (pesky but FREE registration required).
“How many think spreads will widen?” she asked.
The hands of about half the smartest people on Wall Street shot up.
“And how many think they’ll narrow?”
The other half—equally smart—raised their hands.
“Well,” she said. “That’s what makes a market.”
If they didn’t know, nobody could.
Focused only in securitization, When it goes wrong, from The Economist (YubNub’s “eco“), is also a good overview and glimpse:
..it is hard to overstate the effect that securitisation has had on financial markets. Until the early 1980s, finance hewed to an “originate and hold” model. Banks generally held loans on their balance sheets to maturity; some debts were sold on loan-by-loan, but this market was small and lumpy. This began to give way to an “originate and distribute” model after America’s government-sponsored mortgage giants issued the first bonds with payments tied to the cash flows from large pools of loans.
Wall Street built on this innovation, and securitisation took off soon after, then paused before exploding in the 1990s.. It was given a lift by America’s savings-and-loan crisis, which encouraged mortgage lenders to jettison their riskier loans, and by new technologies, such as credit-scoring, that facilitated loan-pooling. Around 56% of America’s outstanding residential mortgages were packaged in this way, including more than two-thirds of the subprime loans issued in 2006. Thanks largely to securitisation, global private-debt securities are now far bigger than stockmarkets.
Answers.com (YubNub’s “a“), btw, is invaluable in navigating jargony fields like finance.
A fairly unique thing about democracy and capitalism is that —as opposed to, say, monarchy or theocracy— both are formal systems for collective decision making, both specify clear rules for obtaining and aggregating the ends of differing individuals.
As such systems, they both necessarily hinge in what we shall refer to as ballots. Usually the paper in which votes are cast, we will here use the word ‘ballot’ to mean ”an external expression of preference.” The key part is ‘external’. Externality has problems all its own but is also our only hope of finding out what others think—telepathy, guessing, and revelation are our other options.
In democracy, votes are the ballots. In capitalism, it’s money. In democracy, a clinic will be built if the majority of voters vote in its favor. It will keep in operation as long as people don’t vote it out of existence. In capitalism, a clinic will be built if enough people pool the money for its construction and it will keep in operation as long as it makes a profit—that is, as long as it ends up receiving more money than it gives away.
Seeing votes and money as instances of the same concept begs an intriguing question: How then do they differ? How is a vote different than a buck? What specific changes do you need to make to a vote ballot to turn it into a money ballot?
.., one of the world’s largest and most influential private-equityWP firms, is planning an IPO of a minority stake, “perhaps 10%.” Appraisals of the company’s total value range “from $20 billion to double that.”
It has some 750 employees.
Talk about leverage.
Maybe the insolent goal is possible after all.
Considering several friends have bantered—semi-seriously—about starting an online Mexican porn ring, alluding of shocking wind-fall profits, and considering that last year “about 13% of website visits in America were pornographic in nature.. while search engines account for about 7% of site visits,” (Economist, Devices and Desires), it is quite a shock to find in the same article 2002 estimates of the (admittedly hard to track) online porn industry measuring it at only a billion dollars. Shockingly little, I’d dispassionately say.
Thought I had already written about this obsession of mine but since I can’t find the post I’ll assume a better part of me reigned in and I had spared you. Most friends, however, haven’t been so lucky and usually win me to point it out in the hope that I shut up quickly: the oh-so-unnecesary “www.” bit one sees in most URLs. There was a time when it may have been needed—like, 1995—but why now? Now, some URLs actually won’t work without it, but that’s usually because of net administrator negligence; in most cases doing away with the appendix is a very minor setting. Once you know this, you die a little (literally!) every time you’re forced to stand it—and you’ll start to notice how often you are.
Today I just found there are in this topic—as in, we are remembered everyday, everything else—fellow anal freaks (tongue-in-cheek-ly, this ones). They even set up a website to spread the meme:  . Of course I had to oblige. Even learned that there were futher Super SaiyanWP levels to attain. So as of now, this is is a ”class B” website, which is the “classification [that] helps remind users that, while the www subdomain is accepted, it is not necessary. In Class B, www.example.net is a valid address, but it redirects all traffic to example.net.”
Here 2 examples—a graph and a paragraph—from a typical article (about the paper industry’s dire prospects, of all things) in this week’s edition of The Economist.
Restructuring in the paper industry is proceeding at a furious pace. The first thing some paper companies have jettisoned is ownership of forests. International Paper (IP), one of the world’s biggest pulp-and-paper companies which is based in Tennessee, used to be the largest private landowner in America. A year ago the company sold 5.7m acres, or 90%, of its forestland—an area larger than Massachusetts. The $6.6 billion sale was “probably the hardest decision that I’ve had to make since I became CEO,” says John Faraci, IP’s boss since 2003. Most buyers were financial investors, but 5% of the land went to conservation groups.
Starting with the graph: it’s a 16-year window to worldwide newsprint production that drives home the article’s main point with eloquence: North America’s newsprint production (a fifth, you will notice, of the world’s; used to be a fourth) is slowly but decisively dwindling; production in the rest of the world, on the other hand, is increasing, albeit not in a hurry.
It’s full of conventions too, but they’re so well thought that you never need to be consciously aware of them as a reader: Take the upper-left red patch, a gentle way to guide your eyes to the graph’s title and instructions. The source always goes at the bottom, smaller-typed, and the y-axis is always labeled at the right, which I find more natural than the common left convention (it makes you look at the graph first, notice its pattern). The x-axis is usually the time axis, its gridlines usually obviated for clarity’s sake, and its labels, usually years, presented in a simple format that marks millennia only when needed. And graphs are always in this blue scheme—a convention to avoid color misinformation that still allows for meaningful distinctions between color shades: darker blue for the main variable under discussion, the foreground; lighter, fading blue(s) for the background variable(s).
As for the paragraph, it’s brimming with fascinating facts about the world. Did you know who the world’ biggest pulp-an-paper company was and that it was located in Tennessee (WP)—of all places? Did you know it also happened to be the largest private landowner in America? (A paper company! The largest private landowner in America!) Did you know it recently sold, because of restructuring, 90% of its forestland, 5.7m acres—an area larger than Massachusetts? Did you know it sold them for $6.6 billions? (Surprisingly cheap, considering it’s an area big enough for many a country.) Did you know most buyers were financial investors but 5% were conservation groups? (A wonderful example of how trade allocates resources, peacefully and quietly, to those who care about them.) Now you know.
Fees in malls’ parking lots are a recent development here in GuadalajaraWP that has been welcomed with the fervent outrage one would have imagine reserved for true wickedness. It is all the more interesting then how quickly the new mode swept the city—I can only think of two malls that remain complimentary, Plaza Acueducto and Plaza Outlet, and it’s clear that they refrain from charging only to attract customers to their rather forlorn premises.
Despite the somewhat frequent calls that something should be done about this, that some new law should be passed to protect us customers from yet another new instance of capitalistic rapacity, I take them as nothing but inconsequential bursts of anger at the inconvenience. I take it as a given that we can all see clearly that mall owners have the obvious property right to charge whatever they want for the use of their premises. We, in turn, have the corresponding right of shopping wherever we want.
So instead I want to discuss here the deeper question of whether or not these parking fees better society. Is the money Parking Lot Operators (PLOs) earn the reward for a valuable service or ravenous plunder hiding under the banner of property rights?
I remember being completely, utterly floored when reading in Henry Hazlitt’s Economics in One Lesson about how, at bottom, supply and demand are one and the same.
Those who think that the destruction of war increases total “demand” forget that demand and supply are merely two sides of the same coin. They are the same thing looked at from different directions. Supply creates demand because at bottom it is demand. The supply of the thing they make is all that people have, in fact, to offer in exchange for the things they want. In this sense the farmers’ supply of wheat constitutes their demand for automobiles and other goods. All this is inherent in the modern division of labor and in an exchange economy.
This fundamental fact, it is true, is obscured for most people (including some reputedly brilliant economists) through such complications as wage payments and the indirect form in which virtually all modern exchanges are made through the medium of money. John Stuart Mill and other classical writers, though they sometimes failed to take sufficient account of the complex consequences resulting from the use of money, at least saw through “the monetary veil” to the underlying realities. To that extent they were in advance of many of their present-day critics, who are befuddled by money rather than instructed by it. Mere inflation—that is, the mere issuance of more money, with the consequence of higher wages and prices—may look like the creation of more demand. But in terms of the actual production and exchange of real things it is not.
Yes, it was obvious. Ridiculously obvious. But I had never realized it. A whole semester of economics in high school plotting gratuitous graphs and fondling equations for what? They should have put this in big, bold black letters at the very first class and let us go afterwards. My twenty something dollars per hour would have been far better employed.
But yesterday I stumbled on Wikipedia’s trade pedia and realized, mind blown, I had only scratched the surface of it. It only took the first, luminous paragraph. (Its scary how good Wikipedia is becoming.)
Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Modern traders instead generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade.
Buying and selling are concepts that only acquire meaning when we bring in money. At its essence, trade (barter), is fundamentally reciprocal—providing no ready way to distinguish between its participants.
So simple and yet so deeply buried by mindlessness. Don’t forget it and watch countless everyday fallacies come tumbling down, naked.
(Notice also the definition of market: “a mechanism that allows trade”—a mechanism that allows for voluntary exchange. There’s untold beauty and nobleness in free trade.)
“I’m not saying making money and doing the right thing are mutually incompatible, I’m saying that making money is doing the right thing.”
“You can’t lie your way to the truth; you can’t government your way to a free market.”
Ayn Rand’sWP, ELZR Atlas ShruggedAM is on the wishlist. I’ve read a sketch of the plot and as soon as I get my hands on it, it’ll be the first book I read. It was a tortuous decision though. I tend to anguish over negative criticism and she’s a woman with her fair share of it. People talk jadedly about “growing out of Rand’s idealism.” They compare her with Herman Hesse, good for rebel-without-a-cause teenagers but pity the adult that still believes them. And so on.
The thing is her radical capitalism and love for America are exactly where I am at.
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