Plenty of food for though here. I’m reminded of our mutual old friend the bond “market” and rules about marking values to it. This week, what with Credit Suisse, and the largest pension fund in Sweden losing 8% of its equity portfolio in SVB et al, it seems some bankers and supervisors were blindsided by out of the ordinary effects when rates moved from 15 years at nil to normal in a short period. The real world happens in the transitions between one set of parameters (or accounting periods) and another, as Minsky understood but accountants often don’t seem to.
Yes, well, exactly. It ought to be a truism of regulation and supervision-- oughtn’t it? -- that the only time the regulations need to work (given that they work well enough when nothing goes wrong/conditions are normal) is in the tails of the distribution. And since rates have been zero for 15 years where are you? What do you need to prepare for:guard against? It’s as if advisers and newspapers financial pages had been advising you to invest your pension savings in govt bonds because they are safe at a time when interest rates are zero and therefore have only one way to go...
Plenty of food for though here. I’m reminded of our mutual old friend the bond “market” and rules about marking values to it. This week, what with Credit Suisse, and the largest pension fund in Sweden losing 8% of its equity portfolio in SVB et al, it seems some bankers and supervisors were blindsided by out of the ordinary effects when rates moved from 15 years at nil to normal in a short period. The real world happens in the transitions between one set of parameters (or accounting periods) and another, as Minsky understood but accountants often don’t seem to.
Dead Souls by Gogol is the ultimate arbitrage of accounting periods.
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Yes, well, exactly. It ought to be a truism of regulation and supervision-- oughtn’t it? -- that the only time the regulations need to work (given that they work well enough when nothing goes wrong/conditions are normal) is in the tails of the distribution. And since rates have been zero for 15 years where are you? What do you need to prepare for:guard against? It’s as if advisers and newspapers financial pages had been advising you to invest your pension savings in govt bonds because they are safe at a time when interest rates are zero and therefore have only one way to go...