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Showing posts from September, 2010

Basel III is out... who cares?

So the new rules for banks out of the Basel committee are out this morning. There is a flurry of articles in the press. I will focus on 2 in the FT.

First an overview of the new rules here.


Global banking regulators on Sunday sealed a deal to effectively triple the size of the capital reserves that the world’s banks must hold against losses, in one of the most important reforms to emerge from the financial crisis.


And an early criticism here.


A recent paper by Samuel Hanson, Anil Kashyap and Jeremy Stein underlines a crucial point: to be any use, the regulatory minimum capital ratio in good times must substantially exceed the market-imposed standard in bad times: “Thus if the market-based standard for equity-to-assets in bad times is 8 per cent, and we want banks to be able to absorb losses on the order of, say, 4 per cent without pressure to shrink, then the regulatory minimum for equity-to-assets in good times would have to be at least 12 per cent.” The authors add that 4 per cent is…

The problem with economics

Or "why monetary theory can unify austrians and keynesians"

The economics profession is deeply devided. Roughly speaking you have 2 camps, on the one hand the keynesians, who emphasize the contribution of government to the economy and the austrians who de-emphasize it. It leads to virulent discussions for an example of the genre see here (spoiler: it is dumb political bullshit that blames the government and obama).

That divide shows how different hard sciences are to economics. You don't really argue as much in hard science. There is a right and there is a wrong. In economics there is a network of things that interact. The effects of action through the network are diffuse, far reaching and mostly intractable. Furthermore the main fuel of the system, money, tends to exhibit non-linearity that acounts for minsky cycles. See here, for an exponential growth of the money supply.

Monetary theory seems to have fallen in disgrace. Very few academics actually focus on macro…

The School of Life

This week and next are back-to-school weeks for my children. They are spread out between two different schools. While the children haven’t changed schools, they have moved to different campuses—in both cases much larger ones. For me this means figuring out new areas of town, new buildings, new bus routes and stops, plus the usual parents’ meetings and the inevitable checklist/scavenger hunt for the items requested by their teachers.

My daughter, especially, is apprehensive about beginning middle school. She went from an elementary campus with two classes per grade to a preschool-through-12th grade facility with 5000 students. Last year she was one of 25 kids in “Valerie” ‘s class. This year, there are 11 homeroom classes in her grade and hers is simply designated by a letter and a number.

I asked her how the first day of school was. It seems she spends a lot of time trying not to get lost. She likes the novelty of having an electronic photo ID for the cafeteria and being able to choose …