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Links 1-04-2011

January 4, 2011

The Traders Crucible Must Read:

Interview with Gary Gorton – The Region – Publications & Papers | The Federal Reserve Bank of Minneapolis: Gorton nails it – we need to find a way to make this activity more transparent and perhaps regulated if it has the ability to destroy the world economy. The problems with doing this are, of course, gigantic. So timely and timeless – the inherent leverage of banking activity is a central reason the entire Austrian School exists, and why Minsky developed his levels of finance.  Modern Macro has little or no methods to even account for leverage, and doesn’t even have straight out money in many of the models.

Controlling leverage is crucial to a robust financial system, and shadow banking has no methods, no system to even look at it, much less regulate it.  Controlling leverage is at the heart of trading as well.

If you haven’t read his essay on the shadow banking system, that is also a must read.  Let me know if you haven’t – I will track it down and get it to you.

More interesting readings:

  1. The Politics and Economics of Finance
  2. Peter Schiff: Federal Reserve Could Bail Out Municipal Bond Market (MUB)
  3. Biggest Financial Decision in 2011 Is European: Matthew Lynn – Bloomberg
  4. Suddenly, the U.S. Is Where the Optimism Is – BusinessWeek: More of that dang word.
  5. The Decline of Available Energy to Society | Gregor.us: I need to stop reading this guy and go hug my kids.
  6. Armageddon Can Wait by Kenneth Rogoff – Project Syndicate: Now he tells us. Did you see the actual data he used in the book?  Nearly worthless – a trader would never relied on such clustered data as a good predictor of the future.
  7. Contrary to the NYT’s Assertion, Japan Does Not “Face a Looming Demographic Squeeze” | Beat the Press: Never heard this analysis before. If Japan has any economic growth at all, their “crisis” is not a crisis.
  8. BBC News – Simple rubber device mimics complex bird-song: Goose calls unite!
  9. The Shadow Banking System: A Third Of All The Wealth In The World Is Held In Offshore Banks: Can this possibly be true?  A massive sucking sound.
  10. Japan creates synthetic version of rare earth metal palladium – Telegraph
  11. More than Y82 tril in banknotes kept at households, businesses › Japan Today: Japan News and Discussion
  12. Silvio Gesell – Wikipedia, the free encyclopedia
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