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 Post subject: Eyes wide shut
PostPosted: Fri Jan 23, 2009 5:57 pm 
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Ho hum! The dead tree media is exulting in the admission from Gordon Brown on the <em>Today</em> programme that he never saw the recession coming. "We believed," he said, "there was a possibility of institutional failure in the banking and financial system so we did all sorts of exercises, simulation exercises. But what we didn't see, and nobody saw, was the possibility of complete market failure, that markets seized up across the world."

This is against the background of official recognition that the economy shrank 1.5 percent in the last three months of 2008. That "plunge", says The Daily Mail, cited as "the largest since April to June of 1980," has "outstripped experts' forecasts by 0.3 percent and fuelled fears the recession will be long, deep and very painful."

View full article here

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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 6:16 pm 
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Location: Edinburgh
Heh... Indeed the one eyed man is king.

Hopefully not for much longer though.


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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 7:02 pm 

Joined: Mon Aug 01, 2005 8:47 pm
Posts: 4434
What should terrify everyone in the UK, is that we have yet to hear anyone in the political class and especially that shower of cretins, masqueradeing as a government, or the theiving scum in the City, or the truly lamentable FSA, show any understanding of what is going on. As a consequence, we have no hope of solveing the situation.

PS
Just yesterday, I had it confirmed that the FSA, is as useless as ever.


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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 8:09 pm 

Joined: Tue Oct 14, 2008 11:52 am
Posts: 225
RAENORTH wrote:
"We believed," he said, "there was a possibility of institutional failure in the banking and financial system so we did all sorts of exercises, simulation exercises. But what we didn't see, and nobody saw, was the possibility of complete market failure, that markets seized up across the world."


That sounds suspiciously like one of these idiotic Monte Carlo exercises, where you assume everything in the world is governed by an uncorrelated random walk, and assume that one in five hundred year events will never happen.

Of course, the real world is not governed by random walks, and when the smelly stuff starts hitting the fan, everything gets very correlated, very fast. One in five hundred year events suddenly become one in ten year events, or worse.

This is the source of the idiotic approach to credit judgments that got us into this mess. I hadn't realised that HMT was doing the same sort of thing at a systemic level, though I suppose I shouldn't be surprised.


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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 9:10 pm 

Joined: Mon Aug 01, 2005 8:47 pm
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Quote:
But what we didn't see, and nobody saw, was the possibility of complete market failure, that markets seized up across the world."


That is pure bollocks, they never stress tested properly, because if they had, they would have had to admit they were all commiting fraud, as the products they were selling had liabilities way beyond their capital bases ability to cover.They would also have had to say goodbye to their bonus' and that was all they cared about.


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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 10:01 pm 
Whenever I see, or hear, another "expert" reviewing our current situation it takes very
little time before the phrase "no one could have predicted this" is spouted, usually with
a bombastic overlay of authority.

Except that Jimmy Rogers made warning after warning about this very problem, I think
it was around 18 to 20 months ago that he sold his $11 million apartment in New York
and moved himself wife and daughters to either Singapore or Hong Kong.
When ensconsed he sold all his USD and replaced it with Japanese and Chinese currency.
(Quite a sum of money all in all).

His predictions on the commodities markets have been uncannily accurate, it's because
of him that my family swapped GBP for physical gold, probably the single best monetary
move I have ever made.

This mess is going to get a whole lot worse, no government will "solve" the problem, we
really have to take care of ourselves and those we love.

Google Jim Rogers for more.


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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 10:05 pm 
"We believed," he said, "there was a possibility of institutional failure in the banking and financial system so we did all sorts of exercises, simulation exercises. But what we didn't see, and nobody saw, was the possibility of complete market failure, that markets seized up across the world."

Sounds like one of those wonderful computer models which are buggering up the world.


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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 11:06 pm 
RN: "Tory "deregulation" is always the source of all ills, .."

I don't think Gordon Brown has really caught on to the implication of the blame game. He has the whole span of history to choose from, I think this latest crisis has its roots in the Dutch Tulip mania, they also had the cheek to sail up the Thames.

But in any case, ten years as Chancellor and nearly two as an [self] appointed Prime minister was not sufficient time to sort out the unholy mess the Tories left behind them. Give the man a break.


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 Post subject: Re: Eyes wide shut
PostPosted: Fri Jan 23, 2009 11:54 pm 
"I don't think Gordon Brown has really caught on to the implication of the blame game. He has the whole span of history to choose from, I think this latest crisis has its roots in the Dutch Tulip mania, they also had the cheek to sail up the Thames."

Now they would just cruise up the Thames.


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 Post subject: Re: Eyes wide shut
PostPosted: Sat Jan 24, 2009 1:15 am 
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Joined: Mon Aug 14, 2006 6:29 pm
Posts: 1304
Location: GMT-5
Gordon Brown wrote:
"We believed," he said, "there was a possibility of institutional failure in the banking and financial system so we did all sorts of exercises, simulation exercises. But what we didn't see, and nobody saw, was the possibility of complete market failure, that markets seized up across the world."


That does rank as one of the most idiotic assertions made by any “world leader,” the absence of a bid and thus a “complete market failure” would be one of the most easily predicted consequences of an event capable of causing “institutional failure in the banking and financial system.” Is Brown telling us that his people did “simulation exercises” that predicted a liquid functioning credit market under such a default scenario?

Its painful to realise that the taxpayers paid for such useless analysis that is blindsided by the obvious, expected result. This is not an “admission” of an oversight, its an admission that Brown and Co. are utterly clueless as to how markets function.

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 Post subject: Re: Eyes wide shut
PostPosted: Sat Jan 24, 2009 1:47 am 
"That does rank as one of the most idiotic assertions made by any “world leader,"

Naturally,when it comes to idiotic politicians Britain leads the world.


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 Post subject: Re: Eyes wide shut
PostPosted: Sat Jan 24, 2009 1:58 am 
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Joined: Mon Aug 14, 2006 6:29 pm
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HarryR wrote:
RAENORTH wrote:
"We believed," he said, "there was a possibility of institutional failure in the banking and financial system so we did all sorts of exercises, simulation exercises. But what we didn't see, and nobody saw, was the possibility of complete market failure, that markets seized up across the world."


That sounds suspiciously like one of these idiotic Monte Carlo exercises, where you assume everything in the world is governed by an uncorrelated random walk, and assume that one in five hundred year events will never happen.

Of course, the real world is not governed by random walks, and when the smelly stuff starts hitting the fan, everything gets very correlated, very fast. One in five hundred year events suddenly become one in ten year events, or worse.

This is the source of the idiotic approach to credit judgments that got us into this mess. I hadn't realised that HMT was doing the same sort of thing at a systemic level, though I suppose I shouldn't be surprised.


You’re giving Brown way too much credit*, they modelled nothing, they used neither Monte Carlo/Stochastic model, nor any reasonable “what if” analysis, either of which would have indicated a dead market after the bubble burst as the expected condition.

What Brown did do is blindly inflate the bubble hastening its burst, which in itself is criminal negligence, but words fail in describing his attempts at remediation - which have lamentably been duplicated stateside following his "lead" - as a result hundreds of billions have been committed to an "all in" bet that has done nothing to support the declining markets and instead nationalises the chance bankruptcy.

*(no pun intended)

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 Post subject: Re: Eyes wide shut
PostPosted: Sat Jan 24, 2009 4:08 am 
Bagua,

[I'm not quite compos mentis right now but I know insight when I see it.]

Great points. But not so much 'idiotic'. You are being too kind. Brown's a fucking liar first, Bagua. The faking by modelling is a lying deflection. There must have been many who expressed reservations. The people invovled in this can't all be mere intelligent automata — some would have shouted "bollocks".


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 Post subject: Re: Eyes wide shut
PostPosted: Sat Jan 24, 2009 4:11 am 
FU (Fed Up) wrote:
That is pure bollocks ... they would have had to admit they were all commiting fraud, as the products they were selling had liabilities way beyond their capital bases ability to cover.They would also have had to say goodbye to their bonus' and that was all they cared about.

I'm warming to you, FU. You've got a puritanical streak. I like that.


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 Post subject: Re: Eyes wide shut
PostPosted: Sat Jan 24, 2009 8:11 am 
Didn't see it coming!!!

I'm no economist but when I had the chance to get back on the property ladder two years ago when prices were at about their peak I decided against it.

The reason was simple really. It seemed pretty obvious that there was going to come a time, sooner or later, when borrowing would begin to slow as people hit their limits and some of those who had borrowed and over-burdened themselves would end up defaulting. The debt bubble was a house of cards and it was inevitable that one of the cards in the bottom layer would get knocked out bringing the whole thing down.

All bubbles burst and all markets, if they get over-heated, need a correction. This is a nasty correction.

If both the 'Masters of the Universe' and the government did see this coming (but that by the time they did so they were in too deep) and chose to let it continue then at worst they are criminally negligent and should be in court.

If they didn't see it coming then they should have done and should be sacked (or voted out) if they haven't already been so.

Dominic


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