UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis

11-18-2008, 04:54 AM

Hi,
Yesterday [Friday. November 14, 2008] I attended the Marschak Colloquium on Mathematics in the Behavioral Sciences at UCLA {University of California, Los Angeles] . This thing is attended by lots of UCLA and USC [University of Southern California] economics professors, including many retired faculty members and other local luminaries. (Two seats to my right was author Alvin Toffler of "Future Shock" fame.) The main speakers presented for an hour, and then the whole group asked questions and discussed the topic. Here is the brief abstract that announced the talk: "The current worldwide financial and economic crisis is the greatest economic challenge we have faced since the Great Depression. The two speakers will treat the crisis in the light of historical experience, will identify some of its causes, and will consider possible policy initiatives at the national and international level to treat it."

The topic was "The Current Worldwide Financial and Economic Crisis." I expected it to be an interesting, balanced, reasoned and academic view of the current bumps in the road, with some modest suggestions for improving matters. Wow! It was all very reasoned, and there was even a little bit of mathematical modeling, but these people are very very concerned! The immense set of interlocking derivative bets made by the big banks is now acknowledged as a complete house of cards, and one that is currently collapsing! (The second speaker made suggestions about policy moves that could be taken "if officials somehow miraculously stop the process in mid-collapse.")

The whole two hours was fascinating, but here are a few of the ideas and comments that I came away with:
• This is the first global crisis of the globalized world. Likely every country will be affected and all at about the same time. (Very different from [the economic crisis of] 1929-1937.)
• The causes were many: lax regulation, lax credit reviews by rating agencies, securitization of mortgages, insane(!) investment leverage, pressure for continuously increasing financial profits, herd behavior, deregulation, ....
• Many financial institutions would be immediately bankrupt if the were forced to value assets at current market prices. (Instead, everyone has agreed to claim that "certain markets are frozen." The regulators wink.)
• Deleveraging is essential to the survival of these institutions. But most deleveraging actions actually lower all institutions' capital bases. So it's a self-reinforcing positive feedback cycle. Serious deflation is a genuinely possible outcome. For the first time in our lives, money could become more valuable over time, rather than less.
• On the other hand, most Latin American currency crises began as fiscal crises. Government frantically created money to prevent deflation, and eventually they got hyperinflation. This, too, could happen here.
• A former vice president of Citicorp was in the audience. He said that the explosion in derivative instruments ran far ahead of infrastructure (markets for trading them, etc.) and far ahead of legal frameworks. He said we haven't even seen the beginning of the counterparty problem.
• An economist from USC in the audience said that we will soon have huge, massive unemployment in the U.S.
• What will happen next (even what could happen next) is unknown. A Swedish economist in attendance said: "Dispense with the illusion that you understand what is happening."

It was a very interesting couple of hours. - M.D.I. (by way of SurvivalBlog readers Bill and Charley.)
survivalblog.com

ghglenn · 11-18-2008, 05:14 AM

Thanks for posting this. I am copying it and sending it to some friends.
The best part is the credentials of these guys...Maybe now, people
will really understand the true gravity of this situation.

orthodoxymoron · 11-18-2008, 05:45 AM

This thing could get a lot worse...but I suspect a lot of volatility...where things appear to be getting better, and then get worse. I worry that this is a sort of financial 9/11 to consolidate banking and to strengthen the strangle-hold of the international central bankers. They seem to be quite arrogant and smug.

The general populace seems to be getting more upset. I fear that the financial meltdown will be followed by a crisis, or series of disasterous events, which could result in martial law and violent civil unrest...culminating in the suspension of the Constitution. I know I'm paranoid...but that doesn't mean they're not out to get us...and enslave us. Welcome to the New World Order.

RubyTuesday · 11-18-2008, 06:13 AM

Did anyone discuss the Federal Reserve's role in creating this crisis? And exacerbating it a thousand fold? It is the very rotten core of the corruption.

11-18-2008, 04:54 AM	#1
Baggywrinkle Guest Posts: n/a	UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis Hi, Yesterday [Friday. November 14, 2008] I attended the Marschak Colloquium on Mathematics in the Behavioral Sciences at UCLA {University of California, Los Angeles] . This thing is attended by lots of UCLA and USC [University of Southern California] economics professors, including many retired faculty members and other local luminaries. (Two seats to my right was author Alvin Toffler of "Future Shock" fame.) The main speakers presented for an hour, and then the whole group asked questions and discussed the topic. Here is the brief abstract that announced the talk: "The current worldwide financial and economic crisis is the greatest economic challenge we have faced since the Great Depression. The two speakers will treat the crisis in the light of historical experience, will identify some of its causes, and will consider possible policy initiatives at the national and international level to treat it." The topic was "The Current Worldwide Financial and Economic Crisis." I expected it to be an interesting, balanced, reasoned and academic view of the current bumps in the road, with some modest suggestions for improving matters. Wow! It was all very reasoned, and there was even a little bit of mathematical modeling, but these people are very very concerned! The immense set of interlocking derivative bets made by the big banks is now acknowledged as a complete house of cards, and one that is currently collapsing! (The second speaker made suggestions about policy moves that could be taken "if officials somehow miraculously stop the process in mid-collapse.") The whole two hours was fascinating, but here are a few of the ideas and comments that I came away with: • This is the first global crisis of the globalized world. Likely every country will be affected and all at about the same time. (Very different from [the economic crisis of] 1929-1937.) • The causes were many: lax regulation, lax credit reviews by rating agencies, securitization of mortgages, insane(!) investment leverage, pressure for continuously increasing financial profits, herd behavior, deregulation, .... • Many financial institutions would be immediately bankrupt if the were forced to value assets at current market prices. (Instead, everyone has agreed to claim that "certain markets are frozen." The regulators wink.) • Deleveraging is essential to the survival of these institutions. But most deleveraging actions actually lower all institutions' capital bases. So it's a self-reinforcing positive feedback cycle. Serious deflation is a genuinely possible outcome. For the first time in our lives, money could become more valuable over time, rather than less. • On the other hand, most Latin American currency crises began as fiscal crises. Government frantically created money to prevent deflation, and eventually they got hyperinflation. This, too, could happen here. • A former vice president of Citicorp was in the audience. He said that the explosion in derivative instruments ran far ahead of infrastructure (markets for trading them, etc.) and far ahead of legal frameworks. He said we haven't even seen the beginning of the counterparty problem. • An economist from USC in the audience said that we will soon have huge, massive unemployment in the U.S. • What will happen next (even what could happen next) is unknown. A Swedish economist in attendance said: "Dispense with the illusion that you understand what is happening." It was a very interesting couple of hours. - M.D.I. (by way of SurvivalBlog readers Bill and Charley.) survivalblog.com

11-18-2008, 05:14 AM	#2
ghglenn Avalon Senior Member Join Date: Sep 2008 Posts: 107	Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis Thanks for posting this. I am copying it and sending it to some friends. The best part is the credentials of these guys...Maybe now, people will really understand the true gravity of this situation.

11-18-2008, 05:45 AM	#3
orthodoxymoron Avalon Senior Member Join Date: Oct 2008 Location: Lunar Base II Posts: 3,093	Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis This thing could get a lot worse...but I suspect a lot of volatility...where things appear to be getting better, and then get worse. I worry that this is a sort of financial 9/11 to consolidate banking and to strengthen the strangle-hold of the international central bankers. They seem to be quite arrogant and smug. The general populace seems to be getting more upset. I fear that the financial meltdown will be followed by a crisis, or series of disasterous events, which could result in martial law and violent civil unrest...culminating in the suspension of the Constitution. I know I'm paranoid...but that doesn't mean they're not out to get us...and enslave us. Welcome to the New World Order. Last edited by orthodoxymoron; 05-28-2009 at 12:07 AM.

11-18-2008, 06:13 AM	#4
RubyTuesday Avalon Senior Member Join Date: Sep 2008 Posts: 224	Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis Did anyone discuss the Federal Reserve's role in creating this crisis? And exacerbating it a thousand fold? It is the very rotten core of the corruption.