Disgraced Trader’s Struggle for Redemption

“It’s not necessarily about money, it’s about winning,” he told a visiting group of American college students. He told them that to understand trading, they needed to forget everything they learned in economics class and envision the amoral, take-no-prisoners world of “The Hunger Games.”

“The only time when people cooperate is to prolong their own lives,” he said. When rivals are no longer useful, “you stab them in the back.”

He told students he had accepted the fact that he was a rogue trader—but in his telling, it didn’t sound all that sinister.

A rogue trader, he said, “is a risk taker. It’s not a crime. It’s violating the mores established by the institution that you work for. It’s a rebellion against institutional controls that deny individuals opportunities for self-actualization.”

→ The Wall Street Journal

Why Not Just Print More Money?

The best alternative, Turner thinks, is his radical proposal—creating money and handing it out to entities that can spend it. He readily concedes that it wouldn’t matter much whether the newly minted money was forwarded to households in the form of bank credits, or used to finance tax cuts, or spent on building new roads and bridges. The key point is that the government would be stimulating the economy without issuing any new debt. It wouldn’t be accentuating the problem of debt overhang, or creating the conditions for yet another boom-and-bust cycle.

→ The New Yorker

Lunch with the FT: Ben Bernanke

Martin Wolf :

I ask him whether he is confident that the improvement in the resilience of the banks is adequate. “It’s a fool’s game to predict that everything is going to be fine, because either it is fine, in which case nobody remembers your prediction, or something happens, and then … ” They remember your prediction, I interject.

Bernanke continues: “My mentor, Dale Jorgenson [of Harvard], used to say — and Larry Summers used to say this, too — that, ‘If you never miss a plane, you’re spending too much time in airports.’ If you absolutely rule out any possibility of any kind of financial crisis, then probably you’re reducing risk too much, in terms of the growth and innovation in the economy.”

→ Financial Times

Black Monday Really Did Look Like 1929 Again

A short and informative recollection of what happened roughly three decades ago, from Barry Ritholtz :

Where were you on Monday, Oct. 19, 1987?

Today is the first time since 2009 that Oct. 19 has fallen on a Monday, and that has me thinking about that day. I recall exactly where I was — in graduate school, walking between classes, when I passed a television broadcasting the collapse.

New York Magazine had a great piece too on February 2008 :

It all started, of course, on Wall Street. On Black Monday, October 19, 1987, the Dow Jones index, for reasons still being debated, fell 508 points, almost a quarter of its total. (The current equivalent, for comparison’s sake, would be a 3,200-point loss on one day.) The drop turned out to be a “black swan event,” a weirdly poetic economist’s term meaning, basically, a fluke (though few people remember it, the Dow still eked out a positive finish for the year). Still, the hiccup seemed to foretell the instability to come. Over the next two years, with the economy perceived to be overheating, the Fed repeatedly jacked up interest rates, which made bonds and T-bills sexier than stocks, which triggered an epidemic of unscrupulous bond peddling, which further destabilized the market—leading to a slowdown. (If that all sounds disturbingly like the recent subprime-debt mess, well, that’s because it is. But more on that later.) And a slowdown on Wall Street, which provides over 20 percent of the city’s cash income, spells a slowdown for New York.

→ Bloomberg View

America : The Sticky Superpower

One of the oddities of globalisation is that although America’s trade footprint has shrunk, its monetary footprint has not. The Federal Reserve is the reluctant master of this system, its position cemented by the policies put in place to fight the 2007-08 financial crisis. When the Fed changes course, trillions of dollars follow it around the world. America’s indifference towards the IMF and World Bank, institutions it created to govern the system and over which it has vetoes, reflects power through neglect.

→ The Economist

Was Tom Hayes Running The Biggest Financial Conspiracy in History ?

It was an audio CD from inside Barclays. Gensler, his coterie, and members of the enforcement division gathered on scuffed-up sofas and chairs in the waiting area outside his office—the only meeting place with a working CD player—to listen. It was a telephone conversation between two Barclays middle managers that had taken place 18 months earlier, during some of the most turbulent days of the crisis. Speaking in a cut-glass English accent, one of the men told a subordinate that he needed to start lowering the bank’s Libors. When the more junior employee started to object, the first man told him the order had come from the most senior levels of the bank, who in turn were acting on instructions from the Bank of England.

Kervielesque :

“Well, that’s sort of ironic that you’re firing me, given that you were involved in it up to your eyeballs,” Hayes later recalled telling McCappin.

→ Bloomberg Businessweek

Blaming China for Black Monday is Like Blaming a Bartender For Your Hangover

IMG_3028Pubonomics :

What is happening? Why is China—the country that people once thought was the engine of the world economy—tottering so badly ?

To answer these questions it is necessary to recognize that China was never the engine of the world’s growth. To be such an engine you have to import more than you export. Then you would create a demand that is filled by other countries, which as a result export more than they import. Importers are the engines in the supply trains of the international markets. Exporters are the wagons, pulled by the demand created by the profligates. Think of what drives liquor markets: barmen or drinkers?

→ Quartz

Credit: Michael Lomax, Impossible Bottle