Timmy elsewhere

At the ASI.

Is Ha Joon Chang actually an economist?

23 thoughts on “Timmy elsewhere”

  1. No, he is a political propagandist several of whose non sequiturs were see-throughable to a teenager with zero economics training the only time I heard him lecture.

  2. Stocks (and real estate, bonds, art, diamonds) only appear to be going up because the currencies we use to measure them are going down.

    Because if you blow a bubble in money, you blow bubbles in everything else.

    Or at least, everything that wealthy people buy with the new money you’ve handed them.

  3. Of course he’s an economist: he knows that if you want to supplement your income writing for the Guardian, you’d better write rubbish.

  4. yes, economists frequently talk tripe on topics outside of their narrow field of specialisation. and sometimes on it.

  5. So buying US shares is basically a punt on there being a tax amnesty on repatriated profits in the reasonably unforeseeable future?

  6. Which must reduce the chances of said amnesty ever happening. Won’t somebody think of the pension funds!

  7. Why should not being an economist be a negative? This is a subject that disappeared up its own arsehole and went from making common-sense observations e.g. that increasing land values reduce general prosperity or that there is a paradox of thrift , to claiming to have cast-iron formulae for pricing options in the future (Black Scholes).As Prof Hudson has observed, most economists are no longer taught any Economic History or the History of Economic Thought and are often mere quant jocks who enter figures into a computer programme and bet billions of other people’s money on the outcomes.They managed to crash the world Financial System
    in 2008 by constructing derivatives on the property market which Adam Smith himself warned needed a Land Value Tax ( circa late eighteenth century).What other subject has had its own students in open revolt so often: Sorbonne 2000 , Harvard (Greg Mankiw) recently? Busted flush.

  8. @ DBC Reed
    2008 was the result of a lot of Americans who imagined that house prices could only go up colluding with poor Americans who had a “heads I win, tails you lose” position with mortgages to lie to banks to buy properties that they could not afford.
    The quant jocks had NOTHING to do with it. You don’t seem to know what quant jocks are – they deal in equities not mortgages.
    The crash in 2008 as with virtually every other crash in history (maybe not the Tulip) was due to liars and cheats – in this case encouraged by Bill Clinton who mandated banks to help poor Americans who couldn’t afford to buy houses to do so. KISS meaning “keep it stupid, stupid”.

  9. Wrong again! Definitively this time.
    Quant jocks = quantitative analysts = Wikipedia “concerned with derivatives pricing” in this case mainly Collateralised Debt Obligations by which mortgage debt (seen by banks as assets) was bundled up and sold .
    Boosting Homeownership in the US was bi-partisan and not altogether dishonourable as it addressed the minorities’ lack of assets. See definitive statement online : White House Fact Sheet August 2004 America’s Ownership Society Expanding opportunities by George w Bush. Classic liberal Democrat stuff

  10. Oh please!
    So Benjamin Graham was concerned with derivatives pricing before stock derivatives were created?
    Wikipedia is a reader-created pseudo-encyclopaedia: it is often useful and/or fun but is not holy writ.

  11. I argue that modern Economics described by the Sorbonne students as “autistic” before it crashed the world banking system in 2008 is not a worthwhile subject and give evidence( of Black Scholes, the Mankiw boycott etc etc). You reply that Benjamin Graham was an expert in stock derivatives. Ho hum.
    I notice you have entirely given up on the commonplace right-wing bullshit that the American housing bust was the responsibility of Bill Clinton.

  12. @ DBC Reed
    Where does one start with someone who has to look up quant in Wikipedia?
    Well, do you understand that “jocks” are the star sportsmen in US colleges?
    Quantitative Analysts are those using mathematics as the dominant factor in the way they analyse stuff, but the term is not applied to so-called “technical analysts” who look at graphs of share prices to guess how other investors will react – they are psychologists rather than mathematicians. So-called “fundamental analysts” are all quantitative analysts to a greater or lesser degree, looking at accounting data, economic data on production/output, selling prices, wages, material and other production costs, interest rates, exchange rates (both historic and forecast), economic forecasts for the industry sector and all the countries in which the company operates, from which it purchases or to which it exports, liquidity data, the impact of major investment/disinvestment by competitors, prices/PER ratings/yields of “comparable companies etc. etc.
    “Quant jocks” run highly sophisticated computer programmes with dozens of semi-independent parameters and carefully calculated formulae linking them (some of which are derived from statistical analysis of the correlation coefficients for each pair of parameters) in order to identify pricing anomalies in share prices. They will, when appropriate use derivatives such as futures and options to take advantage of these anomalies but they are focussed on equity valuations.
    Fixed interest valuations are trivial: I can remember guys doing them in their heads.
    A typical quant like me thinks in a multi-dimensional vector space with at least half-a-dozen dimensions – a quant jock thinks in one with a dozen to twenty dimensions.
    Leaving one side the question whether packaged mortgages even count as derivatives: they were constructed with only two variables – the interest rate and expected default rate. They assumed that there was zero correlation between the default risk of individual mortgages making up the package. If a quant jock had been put on punishment detail and sent to look at one of these his first reaction would have been to ask “what’s the correlation coefficient?”

  13. @ DBC Reed
    I have not absolved the Clintons for their part in the US mortgage debacle but the main blame must lie with those who took advantage of the Clinton legislation (in retrospect whether it was naively or cynically vote-grabbing makes no difference). That I did not pursue the topic while my mouth was hanging open at your claim that quant jocks designed a two-dimensional product whose failings I could see with a blindfold over my eyes only indicates that “Boosting Homeownership in the US was bi-partisan and not altogether dishonourable as it addressed the minorities’ lack of assets.” was less stupid than your other remarks.
    It did not actually address their lack of assets unless Clinton expected the minorities to indulge in a massive number of “heads I win, tails the bank loses” gambles – in which case it was dishonourable. However compared to your comment about quant jocks it looks intelligent

  14. @ DBC Reed
    Firstly you lie. I did NOT say that Benjamin Graham was an expert in stock derivatives: I pointed out that YOU claimed that.
    Secondly, you did NOT mention the Mankiw boycott which claims “There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.” Keynes did base some of his theory on that enunciated by Adam Smith nearly two centuries earlier so any user of correct English would find that Adam Smith’s theories of moral philosophy were basic or fundamental since Keynes built on top of them.
    Thirdly, Black-Scholes is now classified as part of “financial mathematics” not economics. Also it is not cast-iron: I have never used it to deal or advise on derivatives.
    Fourthly, to use “autistic” as an insult is grossly offensive and could get you into gaol. Tim’s non-censorship policy is designed to avoid gaol terms for him consequent upon the comments posted by others but you rtemain personally liable for what you say.

  15. It is obviously difficult for me to calm down someone who claims to think” in a multi dimensional vector space with at least half a dozen dimensions”.
    Just a few mundane corrections to your multi dimensional criticisms:
    It was n’t me calling Economics “autistic” ,it was the Sorbonne students in 2000 .You can tell this by the way my words follow each other.
    I did mention the Mankiw boycott (twice) but not all the quote about Adam Smith. You have obviously been checking up (going into another dimension?) but you do not show how this point is relevant .
    The point about Black Scholes is that it was thought so reliable that it got the Nobel Prize before going definitively wrong and causing the LTCM financial crisis.
    I used the Wikipedia definition of quant jock because you did not appear to know what it means.Obviously you know the words but are too other worldly to realise that they wreaked havoc with CDO’s circa 2008.
    I don’t understand the significance of Benjamin Graham but then you brought him up not I.
    As regards the quite large area of agreement re American Homeownership policy you are too right-wing to see how important George W Bush statements were in his White House Fact Sheet ,still on the net after 10 years .To quote this nuanced statement “In June 2002 President Bush issued America’s Home Ownership Challenge to the real estate and mortgage finance industries to encourage them to join the efforts to close the gap between the homeownership rates of minorities and non-minorities”. Well-intentioned but the American tradition of no recourse mortgages (plus all those quant jocks selling CDO’s into the asset bases of the world’s banks!) was likely to go wrong – and then some..

  16. @ DBC Reed
    The opening sentence: “I argue that modern Economics described by the Sorbonne students as “autistic” before it crashed the world banking system in 2008 is not a worthwhile subject ” quite clearly uses autistic as an insult. Your gratuitous reference implies that you treat it as a justification for claiming that modern Economics is not a worthwhile subject. If you treated “autistic” as a superlative or a neutral word then you sentence would not make sense.
    You mentioned Mankiw once and *then* stated that you had mentioned “the Mankiw boycott” – maybe you had forgotten what you had written? Or do you think that the only thing anyone in the whole world knows about one of the USA’s most distinguished economists is that on one occasions somewhat under 10% of his students staged a walk-out?
    My quotation from the organisers of the “boycott” was to show how ignorant or facetious their claims were.
    If *you* knew what “quant jock” meant you would understand that they don’t get involved in anything so mathematically trivial as packaged mortgages. It would be like using a Ferrari in a stock car race or putting on a Dior dress to muck out the pigs. It is quite clear that you do not: “quant jocks selling …” you try my patience: “quant jocks” are NOT salesmen, any more than Usain Bolt is a Race Walker or Lewis Hamilton a used car salesman.
    Returning to real life at a level that even you can understand – the cause of the 2008 crash was the default on a large number of mortgages which had been obtained by false pretences when the borrowers lacked the ability to pay back the money they had borrowed.There have been a large number of convictions, notably but not solely in California, for fraud. In the absence of such fraud however the intermediaries repackaged the mortgages would have had a trivial effect. If all mortgages had been honest and above-board and 99% had been repaid with only minor delays in a minority of cases, then there would have been no problem from the CDOs.
    FYI Fabrice Tourre was a salesman.
    “I don’t understand the significance of Benjamin Graham” Benjamin Graham was a quantitative analyst in the 1930s. He is actually quite famous for that: sometimes called “the father of investment analysis”. You do not understand the significance of Graham in a debate about the role of quantitative analysis?
    You need to actually do a bit of homework on those occasions when you do not want to make yourself look a complete fool. LTCM specialised in fixed-income arbitrage and had to be rescued because when Russia defaulted on its sovereign debt the prices of all non-US sovereign debt slumped in New York causing a lot of LTCM’s bets to go sour. The Black-Scholes formula is used for calculating prices for options on equity shares: it was irrelevant to the Russian debt crisis.
    One of the advantages of my brain is that I can tell the difference between an equity option betting on the *absolute* price movement of a single share and fixed income arbitrage which is betting on the *relative* movement of a pair of fixed interest securities. It appears that your one-dimensional thought process cannot.
    “the American tradition of no recourse mortgage” Incidentally non-recourse mortgages only exist in ten or eleven US States (Nevada is now non-recourse for most residential mortgages issued after 2009) so in 2008 forty out of 50 states had normal “recourse” mortgages. There is *not* an American tradition of no recourse mortgage – there is a *west Coast* *practice*.
    Am I so “right wing” because I believe in right in preference to wrong and truth in preference to fiction? Unsurprisingly I am in favour of helping disadvantaged ethnic minorities to increase their assets (preferably without stealing) but the Clinton programme did not do that.

  17. One of the disadvantages of your brain that “thinks in multi dimensional vector space” is that you can’t think straight and believe a lot of pretentious ,precious nonsense instead of the simple facts: as an academic discipline Economics has suffered a series of mutinies by its students ; despite the most highly paid experts manipulating computer programmes in vector space and non-existent dimensions (the Sorbonne students said they were tired of dealing with “imaginary worlds” in 2000) the jocks mismanaged a simple real estate bubble in 2008 as badly as the Nobel Prize winners fucked up over LTCM.
    The points we agree on about the problems of attempts to augment minorities assets are obscured by your partisan mental rigidity to see that George W Bush as much to blame
    as Bill Clinton.(If you can refrain from disappearing up your own vector for one moment ,you might care to consider why Homeownerist governments in the UK were boosting homeownership across the board without targeting such minorities , rather the reverse.They have been targeting and pandering to a majority that elects them, whose high house prices are supported by the State: fascism when you think about it .A privileged “in” group is created to despise an underprivileged “out” group.

  18. @ DBC Reed
    It would help a little if you understood what you were talking about. Despite multiple convictions for fraud of salesmen (both estate agents and securities salesmen), you try to allege that the 2008 crash was down to computer programmes. I am pleased to note that you have stopped trying to attribute the near-bankruptcy of LTCM to the utterly irrelevant Black-Scholes. Your next step on the road to sanity should be an acknowledgement that computer programmes designed to identify anomalies in prices of equity shares do not and cannot generate fraudulent defaults in California residential property.
    It is a matter of record that RBS investment banking division has been consistently profitable subsidising the losses on “plain vanilla” banking and that Lloyds decided in the 1980s not to even have a freestanding investment banking division but just to use it as a support function. Their losses were down to bad lending decisions. Northern Rock was a combination of recklessly aggressive lending and a bank run created by Robert Peston who is *not* a quant jock. The two UK banks with the largest investment banking divisions survived the crash.
    Washington Mutual was bankrupt due to mortgage defaults and JP Morgan which had its arm twisted to rescue it has subsequently been fined for WaMu’s allegedly fraudulent misrepresentation of the quality of the mortgages it sold to FHFA – no derivatives in sight, just plain vanilla mortgages. On the other hand, the liquidators of Lehman Brothers are repaying UK creditors in full even after pocketing millions of pounds in fees – see http://www.independent.co.uk/news/business/news/lehman-brothers-creditors-could-get-more-than-their-money-back-after-complex-case-8815974.html.
    I am fascinated by your claim that George W Bush was a co-sponsor of federal policy initiatives in 1994 while running the Texas Rangers baseball team. W is far from my favourite politician and he necessarily shares some blame for the bubble but your claim is nonsense.
    If you like to check a reliable encyclopaedia, you might discover that the Labour Party was in power in the UK from 1997 to 2010, during which period house prices rose by more in absolute numbers than in the previous millennium. That was partly due to a failure to build enough houses to meet demand, which I personally should not describe as a “homeownerist” policy. You might also learn that a previous Labour government passed anti-discrimination forbidding racial discrimination. Why don’t you try it?
    I can remember a government that expanded home ownership by building 300,000 houses a year. The result was that house prices were affordable for young married couples, typically three times the husband’s annual wages/salary – that is what a “homeownerist” policy would create, not a situation where prices rise in order to price enough would-be homeowners out of the market to reduce demand to the level of the inadequate supply.

  19. Oh my gawd! Oh my giddy aunt!!
    J77 raves “If you knew what quant jock means you would understand that they do n’t get involved in anything so mathematically trivial as packaged mortgages.”
    Justin Mc Hood Bigger pockets com (on Net)
    “Those quant jocks are the guys who came up with those wonderful things called CDO’s “.

    As to all your pretentious rhetoric “Quant jocks run highly sophisticated computer programs with dozens of different parameters –in order to clarify price anomalies in stock prices –they are focused on equity valuations.”(Shortened version)
    May I point out that the most efficient evaluators of stock values don’t do much better than Monkeys with Dartboards according to the Wall Street Journal which runs a regular competition?.
    What has George W Bush’s career in baseball management got to do with anything ? I have given you the relevant quote and the date 2004 it was issued by the White House.
    It is very interesting reading about Washington Mutual etc.But irrelevant
    (You are now laying off defending Economics in its problems with its own students.Very wise I should say.)

  20. @ DBC Reed
    I am glad that you find information on WaMu interesting. If you had read it before indulging in your uninformed rants, you might have avoided demonstrating your ignorance.
    What does “Justin Mc Hood Bigger pockets com (on Net)” know about anything? Are you trying to take the Mickey by quoting a visibly phoney name?
    NO, CDOs were not invented by quant jocks. Salesmen are not quant jocks. No quant jock would have ignored correlation coefficients, the understanding of which is one of their primary advantages over people like you.
    As I have previously stated I am not a “quant jock” but I have over 40 years experience as a quantitative analyst, starting before the term was commonplace, so UNLIKE YOU I do know what I am talking about.
    “May I point out that the most efficient evaluators of stock values don’t do much better than Monkeys with Dartboards according to the Wall Street Journal which runs a regular competition?” Tell that to Warren Buffet or George Soros or, locally, Bob Yerbury or Neil Woodford. Even I used to habitually outperform an index portfolio by around 50 times my salary
    What you are looking at is a comparison with the performance of active fund managers *after expenses* with indices *before expenses* ignoring tax on income. Which shows that you DO NOT UNDERSTAND what you are talking about. Since the majority, by value, of UK investors pay higher rate tax, they direct their cash towards shares and funds oriented to capital growth rather than income so shares and funds which provide more of their return via taxable income have become cheaper and show a higher pre-tax return but a lower post-tax return. Despite this, active fund managers achieve a higher pre-tax, after expenses, return than passive funds. The sales pitch of passive funds involves ignoring their expenses and comparing the average pre-tax performance of active funds after expenses with the index. Passive funds *guarantee* underperformance of the index.
    George W Bush was managing a baseball team in 1994 and had no political position when the Clinton administration launched a policy of bias towards “minorities” (there ain’t no racial majority in the USA unless you include all whites as one race). So he was not equally responsible with the Clinton administration for that policy. I have said that I consider that he had some lesser responsibility for the later operation of that policy. Just how difficult is it to understand that the guy who launched the policy was running the White House, not a Texas baseball team?
    I did not feel it necessary to rebut anything about Economics in my last post because you had not produced anything, let alone more lies, about that. I do not doubt that it is very wise not to defend economics against a non-existent attack (how could one?) but why do you find that a matter worth mentioning?
    I still await an apology for your lies about Graham.

  21. From an interesting and well-informed blog called Sidney’s Place : Demon bankers Mar 18 2012.
    “With the variety of borrowers and credit ratings ,with some on fixed and others on adjustable rates, with redemptions being unpredictable, the CDO became a very complex product and quant jocks were employed to analyse and structure them” Seems reasonable enough.
    The blog goes on in some detail to describe the invention, development and scope of the CDO and ventures onto that acme of Mathematical pretentiousness ,David X Li’s Gaussian copula which I did n’t mention earlier for fear of wasting more of your time with your outpourings of indignation.
    I am packing in now : too boring.

  22. @ DBC Reed
    Your gross ignorance of the subject under debate is demonstrated by your frantic search of the internet for blogs by similarly ignorant bloggers who support some fraction of your stupid claims. The quote from “Sidney’s place” implies a mere three vectors – which I could handle with only a pencil and paper. He obviously does not know what a quant jock is – and if you were actually capable of reading what I said (we know that you cannot read what you yourself have written) you could see that quant jocks were concerned with analysis far more complex than that for bundled and packaged mortgages. Even the self-confessedly ignorant Sidney does not attribute the creation of CDOs to quants: the most he claims is that *some* – not all – banks brought in quants to analyse their CDOs.
    Until you apologise for treating “autistic” as an insult and some, preferably all, of your refuted lies, you cannot expect any respect.

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