a shining example of pro-active central bank policy

from the ft today:

santander in spain is the big winner of the financial crisis, now having 3 of the british commercial banks.

regulation from madrid was responsible in reining in banks when they were on an acquisition spree in mexico, and they also demanded a higher regulatory capital ratio than required by the EU. the actions seemed odd at a time, but spain has learnt the lessons of a previous financial crisis. it shows that people who have experienced shocks tend to have the most sensible attitudes towards regulation.

this is all the more remarkable, considering that there has also been a property bubble in spain


this is an old classic from columbia business school

ben bernanke has spent much of his adult life studying the great depression. he will keep throwing money at the markets anyway, it was $650 billion today, although admittedly those are short term loans backed by less than perfect collateral.

i don't think we have a return to andrew mellon's 1929 policy. "liquidate! squeeze the bad out of the system" as much as people would like to see that happen, the effects would just be too disastrous. before the great depression, ben strong, who was fed chairman for 14 years had recently passed away, and nobody had a strong relationship with europe to co-ordinate policy with them. well, now i am waiting for my old books to be delivered to my place on my birthday. my great depression history books are in there.

the belgian government just bailed out fortis ag today. i didn't know a country like belgium could be affected. dexia, french-belgian is in trouble. hypo in germany needs emergency short term funding. glitnir in iceland has been nationalized

dow ended at 10,365. largest intraday points loss in absolute terms. but nowhere near 10% circuit breaker territory.

there is one view. TED spread spiked today to 3.5+%. 350 basis points is the highest TED spread in history. 3-Month London interbank offer rate is 3.76%. So that is the price of money right now. If that looks low, well it is usually about 0.20%, and technically getting to 3.5% is a 6 sigma event (and last year when it first blew up it was a 9 sigma event). which shows how wrong all the models are. It is still a price, and markets are functioning. But it reflects a huge pricing of risk and also a sign that the Fed could be running out of ammo.
i am watching the craziest selling frenzy in some time. do you think we might get to 10,300 by the end of today?

tribute to an unknown cyclist

they're putting up bicycles painted in white chained to railings today to remember all the cyclists that have lost their lives.


from a wiser head

"there was a certain distance from economic reality which allowed some of this bubble in my view, and that is why your take (or mine) is as good as those who got too lost in the beauty of these deliberately opaque financial instruments. and the question really is, what has all this got to do with the real economy? anybody who has clear answers to that is probably a charlatan.

in the middle of all this, an ec400 exam must seem odd. i find it interesting how the world goes on now -- although my experience with other historic events is that most ordinary people do just get on with their lives"

it fits my intuition. things are not going to be good, but i doubt we will have to push apple carts on the streets, if we are sensible and avoid hyperinflation and commercial bank runs. i think our generation simply has to get used to the fact that growth cannot be taken for granted, and we are not all going to get rich quickly and painlessly.

by the way... push email. pros and cons. i now reply to emails INSANELY quickly, because it is like text messaging and having a conversation. but it is rather distracting to have something beep everytime you get a message. it steals time away from you, slowly, despite the trappings of convenience it provides. i think perhaps it is better to get all the email writing done at once, although it is nice to read emails as soon as they are sent (so you can reply if they are urgent, or you can mull over them on your bus ride back)

you know what else is killing me? freeview. 40 free digital channels.

the rational vote

is it possible to be for the iraq war or against the iraq war?

is it possible to be for the paulson plan or against the paulson plan?

i think all of us have our opinions on such issues, and perhaps, as voters, one is supposed to pick leaders who we trust can share the same opinions as we do. yet most of us have never had the relevant experience in the policy or environment of a given issue
so is it possible to be against a plan in principle? one could object to the iraq war, but there was always the chance that there really could have been weapons of mass destruction, which could have been a material threat. and us, not having been privy to such intelligence shouldn't try to second guess.

yet, after the fact, it appears it may have been wrong to go in in the first place. i personally did not even think that WMD was best contained by a land invasion (i think that WMDs are countered by classic mutual deterrence, using your own WMDs and SDI), so that as a justification didn't fly. Yet, at that time, with the fog of war, it would have been presumptuous to say I knew better.

So, perhaps we can only punish people after the fact.

With the Paulson plan, it is clear that it is not the best plan in principle. Yet, again, I do not have enough experience and intuition honed by years in the markets or policymaking. I do not know for sure that if the plan does not pass, the markets will collapse. So a quick response may very well be necessary. We may never know the counterfactual, or it could be too risky. Still, I always noted that Keynes came to the right conclusion vs the other classical economists of the time because of his greater practical policymaking experience.

That is why there is a certain dilemma on my behalf. I've been invited to a debate on the credit crunch, and while I've generally been trying to keep on top of it, I don't think I have any credibility or special information which would inform my opinions.

Yet, this reminds me that many of the decisions which affect the world are basically down to trust that politicians, managers, CEOs and people who are privy to those important pieces of information are working on our behalf. I am not sure that that is the case or we can ever have a world that will be like that, anyway.

So how do voters pick leaders? Should voters even pick leaders?
1. push email. i've never had push email before, so despite my old phone having email capability it was just so annoying to check things manually. now it comes up as an sms beep and if only a short reply is required i can effectively text message back. attachments actually download really really quickly (previously i was only using GPRS, this is my first 3G experience).

2. the typing is easier than i anticipated. the screen is really big, my fingers are pretty small. stuff like blogging and surfing the net are actually more pleasant with the screen mileage. and it's FAST.

3. jury's out on the battery life. especially if it's an integrated phone you could end up doing too much with it. imagine watching a video and then trying to make a call after that. let's see how long this baby can last.


wow the presidential debate was so civil and intellectual

guys, come on... take off your gloves, insult one another! i don't want a policy debate. i want fistfights and gripping television, not a lecture on international relations! what? you guys can pronounce world leaders? i don't care! call the other person names!

seriously though, the tenor of the debates i guess reflects the gravity of the problems surrounding the united states right now.



look, i am no fan of racing, but i must admit the singapore gp track looked really amazing when i was watching the highlights on itv today... there's something about racing at night which reminds me of a videogame, like need for speed or project gotham racing.

it looked marvellous, especially with the normal cars buzzing along on benjamin sheares bridge. so this is one of those things our country can be proud of. quick countrymen... more celluloid moments!
working on my lse site now...

a day ago i was still contemplating crazy spending decisions because i was bored and i thought i may need to get a pc, as my software usage is becoming increasingly windows intensive.

oh well, i've decided against it. in the meantime, remote desktop is my saviour... it's a pretty amazing thing. it's basically like getting parallels for free, it emulates the school windows desktop on my computer, allowing me remote access to my school web server and storage page. so at least i can edit it from home. unfortunately, the coolness doesn't extend to the LSE web server, where they don't support FTP and the other stuff, like Movable Type or Wordpress

first insomnia post in a while

it's the last day of math camp tomorrow, after 3 weeks! i've managed to clear all my work, and i just have to do some revision for the exams next week... to be fair, i've covered most of the stuff before, differential equations, hamiltonians, bellman equations, markov processes, statistics, constrained optimization... just that the notation is slightly different and they added a few bells and whistles.

exams are next week, and i suspect that they won't be as crazy as past years. i think they learnt that trying to cram stuff down in 3 weeks and then setting a very hard exam is not very fair. it's pretty crazy, because if you're in school from 9 to 5 of course you're going to fall asleep during lecture, especially if most of the stuff is already in your lecture notes.

but i think it's been good for camaraderie and class banter. i've also learnt a lot from classmates who have come from other academic backgrounds.

in other news, i have been assigned all of my classes on friday. unfortunately i'm also assigned the last class of the week, friday 5-6 pm and that will really be a challenge because seriously, everyone is just waiting for the weekend. i also got 9-10 am and 12-1 (earliest class and lunchtime? i feel bullied), so they've given me these annoying blocks of free time which i hope they'll fill with my own classes. otherwise that la fitness gym membership is going to start being worth it.



I got my teaching position!

I will be teaching EC102 this year, which is the introductory course for students in the Economics department (and actuarial science, etc)


new home

McMillan Student Village
Creek Road

Moving here after Holborn was really really nice... big room, having my own kitchen, dining table and bathroom. Everything's a lot newer and there's a proper courtyard (just like Lilian Knowles!) It's wider than the Lilian Knowles room though. 3! bookshelves, all the wood is pretty sturdy.

It's by the river, and faces canary wharf. now i just need to get over the commute to school

and i get 4 free cans of red bull, which is stuff which takes sleepy time and turns it into wakey time in the short run.


today's soundtrack

of special note... reading the subprime solution by robert shiller. i notice that this is what obama intends to do when elected (mccain wants to set up a commission so i don't know his plan yet) but, think about it, when he gets elected, implementation lag, we are already halfway into '09. if they wanted to do it, they should have done it much earlier. not sure if it will help much next year, by which time housing prices may have stabilized.


i submitted my teaching application yesterday for ec102 and ec100. let's hope all goes well. then i won't be able to complain about the teaching anymore, i'll have a few extra bucks to spend and i'll feel more productive. i met up with dr shapiro again and discussion about the credit crunch aside, i always enjoy being regaled with stories of how chicago, being able to take a cab to work on a TA allowance then, and stories of the great depression. to be fair, crises like these have me reaching out for the econ history books more than the models.

prison break episode 4, sarah is in the bar drowning her sorrows and asks, "is all life a tragedy?" sarah and michael have something on about getting together "one day", and michael says "one day is today!"

if i've felt a little uptight recently or keep railing or moaning more than i need to, it's because i see where i need to be and getting there seems a little difficult. having something in the future to hold on to, to work towards, has undoubtedly been better for me in terms of being more serious in my work. but it generally makes me an unhappy person. i need to swing back towards some of that "it's today, you're alive" thinking. especially in the midst of all this worry and panic, it is worth noting that thus far things have held up very well. if the world is paralysed by fear, it is important to keep your head. the markets have solved many things but not human psychology. the AIG ad wasn't sarcasm. i thought it was quite good.

p/s spurs are rubbish. and i have a special place in my heart for liverpool street station. it reminds me of all the trips i had to make there. really, london is special to me.

cheer up guys

i think it was an ogilvy ad, based on the love song of j alfred prufrock.

talked about this with my lecturer today as we drifted off topic. i disagree with her on some points and none of us are big experts in this area. but a few key points i took out.

1. watch russia. the signs are the same, country risk, fall in oil prices, capital flight. what will russia's impact be on wall street? it was masive in 1998.

2. helicopter drops are a good thing if credit is contracting, you want to keep M2/M3 up so you can print what you like without it being inflationary. anyway, i don't think they've resorted to the printing presses, the treasury is basically depositing more money in the fed through sale of securities allowing it to lend more. this has pushed t-bills down to 0.01% occassionally on wednesday.

3. this could get really messy, e.g. japan asset price bubble mark 2. i disagree because it seems there isn't anything so far much wrong with the rest of the economy, bank runs, etc. My worry though is that if they try to engineer a solution where they take bad balance sheets and add them to adequate ones through takeovers, and these adequate ones belong to commercial banks, then you lose the firewall between the financial maelstrom and the consumer's deposits. then you could have a problem.

4. economics is a countercyclical profession.


This reminds me of my mom. She was an immigrant, small businesswoman who was always complaining about how "big" business used its power to take advantage of the "little" people. When I told her I was going to Wharton, she said, "What's that?" I said, that's where one trains to become one of the exploiters. "Oh, that's great," she replied. "If you have the choice, why choose to remain small?" I miss her.

Quote by MHodak on marginal revolution
vix up 24% in a day!

the most hilarious thing today was banking haikus

Run fast to big bank
Take out all of your money
Hide it somewhere safe

to be fair though i thought this episode has been handled very well so far


great weekend

liverpool beat man utd 2-1

sunny weather for the first time in a week. made the soccer at regent's park less of a mudfest

thames river festival! live music, fireworks!

also. i was just telling a friend of mine who was preparing for next week that i didn't think the lehman deal would be settled this weekend. lehman is not quasi-public and doesn't deal in anything as important as the mortgage market. so i said the bailout was just a rumour. but we'll see how next week unfolds. whoever was long on vix must be smiling today.

next week ramps up to 9 to 5 everyday with concurrent micro and stats classes and lectures, so that's another step busier than this week. luckily, have done problem sets in advance.
temporary address:

room 221, high holborn residence, 178 high holborn, london wc1v 7aa



haven't had much sleep recently... some nights it's because i've a sinus problem so i have a blocked nose and i can't sleep. no choice but to stay awake and work at reduced efficiency. on a positive note i have chewed through most of the math for micro and stats tutorials, as it's mostly revision.

back to macro now, which i love. but while i enjoy it there's a thought in the back of my mind that i may never work in any central bank anyway, so i may never use this stuff.


current address (until 20 September)

Room 221, High Holborn Residence, 178 High Holborn

too small, and no en-suite bathroom! cannot walk around naked in my room.


fear of death makes men want to have more children

falling ill...


had an introductory soccer game today at hyde park. many south americans. but my hypothesis was true in general. if you're on a postgraduate degree in economics, then your soccer can't be that good. they were decent, not great, which is why we're all studying economics rather than doing something more fun. was the only asian there though. hypothesis 2: skinnier than average people have a comparative advantage in soccer, although maradona is the exception which disproves the rule.

i don't think peak oil will come in my generation. i think peak "spring from the ground" at $1 per barrel or less extraction cost oil has come... but look at all those unconventional sources! plus, i think the british may be pissed off enough to start up more nuclear plants.

next week's schedule

First week... not too busy, still have time to skype

All Lectures at Old Theatre

Monday 8 September

10.00 - 12.00 Revision Maths Lecture
16.30 - 20.30 Induction + Welcome Reception, Senior Dining Room

Tuesday 9 September

11.00 - 12.00 Revision Maths Lecture
14.00 - 15.30 Revision Maths Classes (either of the 2)
15.30 - 17.00

Wednesday 10 September

11.00 - 12.00 Revision Maths Lecture
14.00 - 15.30 Revision Maths Classes
15.30 - 17.00

Thursday 11 September

10.00 - 11.00 Math for Micro Lecture
14.00 - 15.30 Revision Maths Classes
15.30 - 17.00

Friday 12 September

10.00 - 11.00 Probability and Statistics Lecture
11.00 - 12.00 Math for Micro Lecture
14.00 - 15.30 Math for Micro Classes
15.30 - 17.00

return to tory boom and bust

austerity britain. times are bad in the uk. apart from the autumnal storm, times are so bad that gordon brown is telling everybody to save food, because we throw out so much food every year. this is what happens when you have an economy built on finance and very little else.

the pound has given up most of its gains against the us dollar and is performing abysmally against the sgd.

meanwhile, fannie and freddie are going to be nationalized. to be fair, these GSEs were FDR creations, so you can't blame the current administration for "nationalizing" them. they get preferred stock anyway, so there's some taxpayer protection. and the suspected endgame is not to keep them nationalized. it's to split them up into smaller organizations with more manageable risks (which makes sense). if mccain wins this should happen, i'm not so sure what obama has to say about this.

but there is a little spot of prosperity in the uk. the blue side of manchester. £900 billion!

bumper cars

seriously, without traction control and the rain, the belgian grand prix was like bumper cars...but there was a fantastic manoeuver (seriously, i used to be good at writing, i can't understand why spelling such words is so difficult nowadays) which ultimately hamilton got docked 25 seconds for.


for once in my life....

i have a toasty jacket.

what do you have today?
back in london... holborn is not quite bankside... at bankside i had a fantastic room facing out... now i have a lovely view of the courtyard... i always prefer facing a road, i like noise and bustle. there also isn't an ensuite bathroom. not for me guys... for me facilities >> location.

but it's good to be back and in my own independent dwelling. it sharpens my territorial instincts... on the first day, was welcomed by a traditional autumn storm and a file which said: some of this material is not lectured. please finish over the weekend.

so, lot's of stuff to do but it isn't really that difficult. will be heading to bicester to do some shopping.


just as i returned, there was an england u21 - portugal u21 match that they were struggling to sell tickets for, so they had one of those offers like our national stadium where you could go in for £10. i thought it was a pretty good offer for a match at wembley with quite a few premiership players on show and something to play for (a euro 2009 playoff place).

if the match is any indication, we shouldn't expect portugal's future to be bright. although it may very well be the case that they graduate many of their junior players to the senior squad already. england u21 appear to be trying to pass the ball, which they can do quite well. however, in pace, power and physique off the ball they seem to be that much stronger... agbonlahor was single-handedly owning the entire portuguese defence. so the temptation is there to just keep lofting it to chase. but well portuguese guys, that's why you should stop diving and learn to bulk up like a certain c. ronaldo.


childhood dreams

reading bill bryson's short history of almost everything, i'm reminded of one of my childhood dreams. i wanted to be a geologist and collect rocks in remote corners in the world... i used to be able to be identify rocks with a stamp collecting kind of obsession, and be excited by the words moho discontinuity.


just took my super high-tech ippt on saturday, the one with all the bells and whistles and electronic counters... my weakness was standing broadjump!

i missed the singapore bay run this year because i was too lazy to get up... i've submitted a ballot to run for the london marathon to make up for it