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The professors' conceit was to think that models could forecast the limits of behavior. In fact, the models could tell them what was reasonable or what was predictable based on the past. The professors overlooked the fact that people, traders included, are not always reasonable. This is the true lesson of Long-Term's demise. No matter what the models say, traders are not machines guided by silicon chips; they are impressionable and imitativ..
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Roger Lowenstein |
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The risk models developed by private firms, whether hedge funds, rating agencies, or banks, are not reliable guides to the future. Even when these models are applied by government regulators, their application is flawed, because they look to past market history as received truth. But markets, we must emphasize, are imperfect; they are the agglomeration of myriad investors, most of whom usually act rationally - usually, as history has shown,..
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Roger Lowenstein |
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A chief attraction of the real bills theory was that it took decisions regarding the money supply out of human hands. John Carlisle, Treasury secretary under Cleveland, maintained that issuing notes "is not a proper function of the Treasury Department, or of any other department of the Government." The task was just too difficult. Rather, Carlisle said, currency should be "regulated entirely by the business interests of the people and by th..
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Roger Lowenstein |
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Warburg was shocked by the primitiveness of American finance. Whereas banks in Germany functioned with near-military cohesiveness, banking in America, he concluded, suffered from an ethos of extreme individualism.
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Roger Lowenstein |
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VARIOUS OTHER BANKERS--heirs to the Indianapolis convention--carried on the fight for reform. However, unlike Warburg, they favored establishing an asset currency, a decentralized scheme based on each individual bank's loans.
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Roger Lowenstein |