econmavin's Blog

econmavin Commented on Could It Really Be Over? by Josh Marshall

2009-06-30T19:47:32Z

Coleman has already said that he may go the Federal Court route. Apparently the Republican approach is to drag things out in the courts so that a final decision won't be made until it is time for the next election. Why not? They already elected a President by court order.Why not filibuster control of the Senate?

econmavin Commented on Health Reform Deniers: Logic? We Don't need No Stinkin' Logic . . . by OldenGoldenDecoy

2009-06-24T19:59:39Z

Having worked in the health insurance business when it was dominated by not-for-profits, I can say that Obama is right on the money. For profits would not have been able to function if government had not fallen for the competition cures all ills argument and crippled the not-for-profits ability to do their job.

econmavin Commented on IS ECONOMICS REALLY DEAD? by econmavin

2009-04-15T19:22:39Z

The problem with the Rational Expectations model was that it assumed that expectations were rational rather than decision making being rational given the expectation. The macro-economic econometric models are still valid. The microeconomic models need to be modified to reflect how expectations are generated.

econmavin Commented on MATERIALITY AND THE AIG BONUS PROBLEM by econmavin

2009-03-22T13:49:04Z

Bill;
You seem to forget that it was unregulated private industry that got us into this mess to begin with. AIG is big enough that the bonus would have gotten lost in their numbers fog as well as they would have by government people. The head of AIG, although appointed by government, came out of the private sector. The bonus contract were written before the government owned 80% of AIG.

Your biases are now showing.

econmavin Commented on MATERIALITY AND THE AIG BONUS PROBLEM by econmavin

2009-03-22T13:44:43Z

mea-culpa

econmavin Commented on THE ARROGANCE OF AIG by econmavin

2009-03-17T17:22:38Z

My article was addressing item 3 of your response. However, I have written other articles addressing item 1. Perfect Knowledge also includes the assumption that there is perfect knowledge regarding the product that is being bought or sold. It is clear that the fault was not so much insider trading as it was insiders not knowing what the risks and returns were of the products they bought and sold.

econmavin Commented on THE ARROGANCE OF AIG by econmavin

2009-03-16T21:38:56Z

In September of 2008 I wrote:
As an economist I have always believed that “Market Discipline” would provide the means of preventing excess risk and imprudent actions on the part of corporate executives. I believed that ENRON and World Com were aberrations. I did wonder, however, how these aberrations could occur.

The recent meltdown in the mortgage markets has convinced me that the excessive risk taking is not an aberration. Rather, it is built into the very fabric of the modern financial system. How this came about is very simple:

For “Market Discipline” to work the participants and decision makers in the system have to be subject to both the rewards and the potential losses from assuming high risk. When the decision makers are subject to the potential losses they tend to act in a prudent manner. The problem lies in the fact that the remuneration systems in place in today’s markets provide very high rewards to executives who engage in successful risk taking. On the other hand, if the risks are unsuccessful, there is no penalty to the decision makers. They may lose their jobs, but their separation packages have such high payouts that the losses are limited. Just look at the Fannie Mae and Freddie Mac CEO’s. The payouts are in excess of $10 million each. Bears Stearns had similar arrangements and I’m sure that Lehman executives will also come out well off. The biggest losers are the shareholders and the public. The people making the decisions are not the risk takers and have no incentive to be prudent decision makers.

Lets face it, if you are allowed to gamble with someone else’s money and are allowed to keep a high percentage of the winnings while getting paid for doing the gambling if there are losses, why wouldn’t you make the riskiest bets. In fact, looking out for your own self interest, you’d be dumb not to take inordinate risks. For you it is a win-win situation.

econmavin Commented on THE ARROGANCE OF AIG by econmavin

2009-03-15T22:22:09Z

I believe you mean $450 million. Either way it is over the top and is a threat to the free enterprise system. Regulated capitalism provides strong long term growth with manageable business cycles. Unfettered capitalism lead to the arrogance of greed and the market discipline of depression.

econmavin Commented on AIG: Bonuses, Come Get Your Bonuses by steve katz

2009-03-15T19:25:41Z

1. Insurance companies get sued all the time. They are so good at delaying tactics that anybody who thought they were entitled to a bonus would be long dead before a cent was ever paid out.
2. The force majeure argument is excellent. I wish I'd thought of it.
3. Retain which excellent employees? Where would they go? How good were they given that they got AIG into the mess to begin with.
4. Corporate Welfare gone amok.

econmavin Commented on REPUBLICAN GOVERNORS ATTEMPT TO TURN US INTO EUROPE by econmavin

2009-03-15T16:35:21Z

When people have money to spend,unemployment, retail jobs are preserved and created so that people get off the roles. Without extended benefits and job creation people move for either benefits or jobs. (That is why we needed a national welfare system) We've had extended benefits in the past and when the economy improved we reduced them. Extended benefits have always been intended to meet exceptional circumstances. We even had extended benefits during the Reagan Recession.

econmavin Commented on REPUBLICAN GOVERNORS ATTEMPT TO TURN US INTO EUROPE by econmavin

2009-03-14T15:37:22Z

Bill:
Where you see justification, I see political expediency. You are just as partisan as I am. Remember, most of what I wrote had to deal with the consequences of the governors' actions. Mobility in the USA is actually quite high compared to the rest of the world. In addition, extending unemployment is a temporary measure to cover extreme circumstances.

econmavin Commented on REPUBLICAN GOVERNORS ATTEMPT TO TURN US INTO EUROPE by econmavin

2009-03-14T15:17:58Z

When I cover normative economics all sides are covered.

econmavin Commented on Paul Krugman gets something wrong by Eddie-george

2009-03-11T19:57:34Z

CDS bear too many similarities to insurance contracts to not be classified as such. If it walks like a duck and quacks like a duck, guess what? The securities issuers went to great lengths to have CDS classified as securities when in fact they are not. I used to write insurance contracts. These (CDS) fit the bill.

econmavin Commented on Warren Buffett Has It Right by econmavin

2009-03-09T21:55:09Z

Actually, the Democrats are providing the Republicans the excuse to derail the vital parts of the legislation. They (we) need to stop doing that. These extras divert attention away from the needed fiscal policy stimuli and make much of middle America believe that all of the legislation is bad.