Modern economics

[Dave B]

Latest post of the previous page:

Got an "r" missing from, Missier, Alan.

Don't not make no difference to the link though

[Alan H]

Got an "r" missing from, Missier, Alan.

Don't not make no difference to the link though

Oops! Now fixed.

[Nick]

The best headline I heard about (from The Sun, I believe), advocating the resignation of the Barclay's CEO, read:

Spoiler:

Sign on, you crazy Diamond!

[Alan H]

Someone decided to let Barclay's know what they thought of them.

[Fia]

Neat.

[Alan H]

While we're at it: I see Barclay's have a sense of humour.

[Alan H]

Yet more people letting Barclays know what they think of them.

[Dave B]

And still the worms crawl out of the can.

On top of all the fraudulent practices that led to the first crashes to the fiddling of interest rates we now have HSBC and other banks circumventing, or simply ignoring, the safeguards and dealing with drug money and cash for nations not exactly friendly towards the west.

Surely the evidence for far stricter regulation is now complete - these organisations, and it seems systemic, are simply not to be trusted in any area. I will be very surprised if the Americans do not put the banks in chains.

[Alan H]

Wealth doesn't trickle down – it just floods offshore, new research reveals

A far-reaching new study suggests a staggering $21tn in assets has been lost to global tax havens. If taxed, that could have been enough to put parts of Africa back on its feet – and even solve the euro crisis

[Dave B]

I always thought the concept of wealth trickling down was a product of fantasy. These people seem to be like dragons - dragons supposedly hoarded gold even though it was totally useless to them. A bank account full of cash is a sterile thing, has not real value except to a diseased mind with a hoarding obsession.

No different, essentially, from the bloke who tried to take (on his bike) every book we dumped from the Oxfam shop, to the point that he filled his house, except for the entrance hall, and rented garages to store even more.

It's a sickness.

[Alan C.]

Dave.
A bank account full of cash is a sterile thing, has not real value except to a diseased mind with a hoarding obsession.

I agree completely, greed is at the top of my hate list.

No different, essentially, from the bloke who tried to take (on his bike) every book we dumped from the Oxfam shop, to the point that he filled his house, except for the entrance hall, and rented garages to store even more.

I think that's a different kind of disease to hoarding money, lots of folk keep all kinds of stuff that they don't really need, I do myself, but every now and then I have a clear out and put bags of stuff to the charity shop.
My usual rule of thumb is, "have you used/needed it in the last 6 months?" No, then get rid.

[Dave B]

Hmm, I think there is a difference between the usual junk many of us fill all available storage space with and the obsessive collection of anything, even money.

Not so sure about the "6 month rule", I have lots of tools that I have not used for 6 months but would never get rid of! We had a "new broom" at work once, insisted that we get rid of all those untidy bits of pipe and metal that we were "hoarding" in the workshops and labs. And not to do the same in future, he did not want to see untidy racks of stuff.

So we stuck to the rules. When one of the engineers wanted something made from 300mm of 150mm PVC pipe I would buy the minimum length available - 6 metres - cut of 300mm and throw the rest (about £30 worth) away. The rule soon got dropped, my departmental boss jumped up and down when the materials bill became about ten times the previous, he and the other bosses told the new guy where to get off!

[Dave B]

I was not sure whether this was one for this thread or the NHS one - but since I consider it the Economics of Madness perhaps this one is more appropriate.

Listening to the R4 prog on the rising TB problem in Britain - particularly in terms of the screening that is not done, for latent TB in new immigrants from problem areas.

One example was of a London hospital that set up a screening service and paid GPs to refer new immigrants automatically. They found and treated about four times more latent cases than active. Then the funding for paying the GPs was removed and the scheme stopped.

It seems that it costs £5000 for medication alone to treat active TB, but only about £100 to treat latent TB. As the nurse interviewed said, it's a no brainer.

One can only assume that the managers or accountants reviewing and stopping the GP payments for this scheme had no brains.

I did also wonder why GPs need extra payments to encourage them to refer potential sufferers from a disabling and often fatal disease. It seems many cannot recognise the symptoms anyway, assuming that it is a disease of poor people in some ways. Well, there are a lot of poor people in Asia and other countries that can infect those coming to the UK it seems. They are given a chest X-ray at the airport but this detects only active TB, there are several times as many cases of latent TB entering the country every week.

Does not screening and cheaper treatment make economic sense in the end?

[Alan H]

Robot trading loses firm $440 million in 45 minutes
12:07 3 August 2012

Paul Marks, chief technology correspondent

The dangers of high-speed, computerised stock trading - which have in the past caused inexplicable "flash crashes" in the markets - have now been visited big-time upon one of the companies in the vanguard of wielding the technology.

Trading software at Knight Capital Group of New Jersey this week began automatically buying shares in a vast array of companies - like RadioShack, Ford Motor Company and American Airlines - in a 45-minute foray of unauthorised trading. When the company then quickly resold its newly acquired, unwanted stock (its massive stock buys had moved the markets) it found it had lost $440 million - four times the profit it made in 2011.

The loss has seriously hit the company's ability to conduct business, says The New York Times. The newspaper says Knight Capital has been a hyper-enthusiastic user of automated trading - indeed, it calls Knight Capital an "unapologetic advocate" of it - and says the firm has striven to outperform its competitors by using such systems to their fullest extent.

The news won't surprise observers who understand the technical limitations of trading with fallible computer systems at speeds humans cannot fathom. The Bank of England warned last summer that high-frequency computerised trading systems that buy and sell shares in fractions of seconds risk destabilising stock markets, with the bank's executive director for financial stability describing the use of such algorithms as "a race to zero".

The US Securities and Exchange Commission is investigating just what happened at Knight Capital - and calls for tighter regulation of computerised trading have already begun.

And this one that was linked to in the above article:

High-speed trading algorithms place markets at risk
15:39 8 July 2011

Jacob Aron, technology reporter

Computers that buy and sell shares in a fraction of a second are in danger of destabilising stock markets around the world says Andrew Haldane, executive director for financial stability at the Bank of England. Speaking last night at the International Economic Association in Beijing, China, Haldane said that High Frequency Trading (HFT) firms were in a "race to zero" that could increase market volatility.

HFT algorithms can execute an order in just a few hundred microseconds, rapidly trading shares back and forth in order to quickly eke out profits from minor differences on the various exchanges. These trades are so fast that the physical location of the computers executing them becomes vital - even being a few hundred kilometres away from the exchange could mean missing out. It's commerce far removed from any ordinary experience, as Haldane illustrated with an every day example: "If supermarkets ran HFT programmes, the average household could complete its shopping for a lifetime in under a second."

Now it seems this lightning-fast trading could come at a cost. Haldane blamed HFT for causing the "Flash Crash" which occurred on US markets last year, with the Dow Jones losing $1 trillion in just half an hour. The event was marked by trading oddities such as management consulting firm Accenture shares falling from $40 to $0.01, while auction house Sotheby's rose from $34 to $99,999.99 - the lowest and highest values permitted by HFT algorithms.

Haldane said that the latest research shows that while HFT increases liquidity when markets are functioning normally, it has the opposite effect during more troubled times. He also built on work by Benoit Mandelbrot, the mathematician famous for inventing the word "fractal" for patterns with self-similarity. Mandelbrot showed that stock trading can also display fractal behaviour, and Haldane last night said that HFT algorithms cramming more and more trades into this fractal structure could lead to the kind of pricing abnormalities seen during the Flash Crash.

The solution? Introduce new rules to limit the speed of HFT. "Flash Crashes, like car crashes, may be more severe the greater the velocity," said Haldane. "Grit in the wheels, like grit on the roads, could help forestall the next crash."

[Dave B]

Yeah, I heard this earlier and shuddered. I love technology but this is a case of dangerous misuse. But I will not hold my breath waiting for the plutocrats to get sensible when there's another percentage to be won by getting your bid in 1 microsecond before that of another, regardless of the potential risks.

Fucking idiots!

[Nick]

Yeah, I heard this earlier and shuddered. I love technology but this is a case of dangerous misuse. But I will not hold my breath waiting for the plutocrats to get sensible when there's another percentage to be won by getting your bid in 1 microsecond before that of another, regardless of the potential risks.

Not misuse, Dave; the trades were unauthorised. It's a technical problem as much as an ethical or market problem.

And all the losses will be met by unfortunate investors. Unlike the multi-multi-multi-billion Euro cockup which is the Euro zone, which was created, in the face of all and any economic sense, by politicians and beurocrats.

Fucking idiots!

Quite.

[Dave B]

My use of the word "misuse" really referred to my contention that computers, which I love as tools, should never be used to make critical decisions - that's a job for people, especially where the future of other people is at stake. This really joins up, in my mind, with your contention, Nick, about economics being a science. I know there are mathematical rules but the real world sometimes hiccups in ways that computer driven rules obeying systems will never see. That means fuck-ups will inevitably happen.

As a man on the radio said, you can test your system every which way but if it interacts with a glitchy one then don't stand a chance. I do wonder if they run these updated systems off-line and in parallel for any decent length of time before putting them on the front line.

The suggestion on the radio was was that the regulators would be looking carefully at the high-speed computer led systems. I won't hold my breath - but I still say that regulation is the only way to cure the problems in the whole of the financial industry.

It is always the innocent that pay in the end.

[Fia]

but I still say that regulation is the only way to cure the problems in the whole of the financial industry.

Yup. Agreed. We can thank Thatcher for that initial stupidity, and now the doom and gloom mongers who say the UK economy will fall apart of we don't take their miserable tainted tax pounds

[Dave B]

I await with great interest to see how many banks pass on how much of the "cheap" money WE are making available to them to invest in British industry. The government (that's a laugh for a start) is only loaning them OUR money for this purpose.

[Alan H]

If those bankers responsible are ever brought to book, I wonder if they will simply buy their way out of a prison sentence like this wealthy Chinese man did when he killed someone in a car accident: Double Jeopardy

In China, the rich and powerful can hire body doubles to do their prison time for them.

The ability to hire so-called substitute criminals is just one way in which China’s extreme upper crust are able to live by their own set of rules. While Occupy Wall Street grabbed attention for its attacks on the “1 percent,” in China, a much smaller fraction of the country controls an even greater amount of wealth. The top one-tenth of 1 percent in China controls close to half of the country’s riches. The children and relatives of China’s rulers, many of whom grew up together, form a thicket of mutually beneficial relationships, with many able to enrich themselves financially and, if necessary, gain protection from criminal allegations.

[Nick]

Thankfully, Alan, the answer is no.