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San Fran Fed Spends More Money To Justify Colossal Failure At Anticipating Consequences Of Its Actions
Part two of the Fed's supremely ironic "Predicting Crises" series (Part 1 can be found here). After all, the Fed can either create bubbles/pyramid schemes or anticipate them. No one can expect it to do both. And it is so much better at the former, so just let it focus on what Bernie Madoff has taught it to do so well.
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Isn't it more a case of what the Fed taught Madoff and the other pyramid dealers!
good point. Madoff was an 'insider'.
I wonder if common sense is a "model".
Conclusion: "Three reasons can explain our predictive failure. First, the causes of the 2008 crisis might differ across countries. Alternatively, the 2008 crisis might be the result of a truly global shock, such that its incidence varied across countries in a way that is unrelated to the country-specific regulatory, financial, and macroeconomic fundamentals” we consider. Finally, the shock might be one that originated in the United States and spread contagiously across national borders. All these interpretations bode poorly for the success of early-warning models going forward. If the causes of the crises differ across countries, there is little hope of finding a common statistical model to predict them. The same holds in cases of common or contagious shocks if a country’s ability to withstand it is unrelated to fundamentals. We conclude that constructing a plausible statistical model that can predict financial crises similar to the current one will be challenging."
I have 1 reason behind their predictive failure: They still think that the market collapsed as a result of random, unknown, variables.
It's truly incredible isn't it?
Here we have a system in which value is assigned to securitized debt by those with a profit motive (not to mention a history of dishonesty), verified by 3rd parties who have their own profit motive (not to mention strong ties to the first parties), and finally sold to parties who have zero capacity to determine underlying value for themselves.
The model is nothing more than systemized deception and fraud.
And yet our economic leaders seem to be naively assured that the system *should* produce value, and both surprised and confused when it does not.
BINGO...right on target. Great summary!
They are all neoclassical economists, who believe that markets mainly exist in equilibrium. When your model doesn't reflect the real world, it will never be right in the real world.
If you think that your model world is the best that you (or anyone else) can ever do, then you will believe that models cannot reflect reality.
Dumbcuffs! Ever thought neoclassical economics' postulates were incorrect and that you should scout around for some alternative?
What about those 12 economists who predicted the crisis? How many neoclassical dunderheads in that lot?
Sheeh!
neoclassical my ass...
the fed and treasury are full of keynesian
and monetarist economists with a smattering
of post-keynesian / monetarists
neo-classicists are a minority...
"Other equally plausible variables fail to perform well, such as the magnitude of real estate price appreciation"
They are kidding, right? Parabolic real estate price increases didn't factor in? How about the availability of free money, and the willingness to lend it to virtually anyone. Do you think that may have provided a clue that an economic storm was brewing on the horizon?
Additionally, those charts with the funny, blue diamonds are horrendous.
The authors of this paper, in addition to being narrow-minded and naive, have not read Taleb's book. Had the SF Fed bought a copy of "The Black Swan" used off of Amazon, they could have saved thousands of dollars publishing this intellectual scrap heap of a paper.
they should have added another reason for failure:
they are voodoo economists who couldn't tell the difference
between a predictive model and a lottery ticket...
the fact the many economists and commentators saw the handwriting on the wall speaks poorly of the fed....such incompetence is basis enough for abolishing that putrid sewer of scumbags and discarded tampons...
instead of worrying about a unified theory of economic predictiveness they should worry about their own backyard...except for the fact that rockefeller / rothschild want to rule the world through the fed-cia....
O my god! They are blind. Or simply blowing smoke for smoke sake. If someone at the Fed, hopefully, is even mildly interested in how they are screwing up this country, then they should at least monitor ZH, however sinful according to their religion.
India is richer than the U.S?I think people will laugh if they read or hear me say that. But look at this:It is estimated that India has about 13000 tonnes of gold within its boundaries(I am not Indian,however I know first hand how facinated they are with gold jewellery). So that translates roughly to $500 per every man,woman and child in India. At the same time,and according to many stats I come across,the cumulative debt of the U.S. is about $30000 per every man woman and child in the U.S.Now that clearly makes India richer than the U.S. Whose fault is this?
Naive.ignorants, or incompetent,are not realy the proper world. The question is do they realy care as long as they know they can do anything they like?
Talk about 'head in the sand' or 'up their a##' Or to paraphase Janet Tavakoli, 'model masturbation makes the Fed go blind'.
Sorry,probably a dumb question but who funds the fed employees, buildings, lawsuits, etc? The member banks? The federal gov't?
as far as we know the fed funds itself.....
they have many sources of income not the least of
which is interest which the treasury pays them
for the t-bonds which they hold....
they also have other interest income from overnight
loans which these days is either nothing or almost
nothing....
and we shouldn't forget the massive amount of
mbs they hold which either pay interest or
would be sold for capital gains....
it is basically a conglomerate business with
multiple sources of income....
Common sense is devalued as gold is to off the wall extremists is to most thought in this world...today/yesterday/tomorrow?
Capers anyone?
More CYA by the Fed. They don't understand basic economics........I would not let the Fed even try to balance a checkbook.
Do they understand that they just admitted they can't do what they are supposed to do, while still claiming they are the only ones competent to do it, namely manage the economy?
The thing that must be roundly rejected by anyone and everyone is the notion that there is a single man or group of men who are wise enough and powerful enough to manage, in real time, an economy made up of hundreds of millions of individual souls. Granted, they've tried to dumb us down to where we can be put into a box and manipulated, but even in light of the extent to which they've been able to do that, their efforts to manage this economy are a massive fail. How can they be seen as anything else? Do excuses matter? "We failed because it's too hard". Fine. Go get real jobs you worthless ****s.
govt fail: http://failblog.org/2009/09/28/government-fail/
This is something that appears to have been written by a well intentioned intern, but it would have been better not to have made this available to the public as it makes the FRBSF seem naive at best...
Denninger has some funny ass videos
ROFL! 4 Minutes With An ElephantIf forecasting a similar future crises and the relative severity of the crises across all countries is too difficult, then the effort should be de-scoped to predicting simply the existence of the crises in the US. As the article says, “the shock might be one that originated in the United States and spread contagiously across national borders.” Knowing the relative severity of effects across the globe is a follow-on effort to knowing of a local eminent crises. Much of this paper reads like a study that ran of funding before completing the project so that most of the content is an excuse for failure.
You probably meant to post your serious comment directly under Tyler's. Use the comment box at the page's bottom to do that, they edit you comment under me to read "very funny"
Whenever I read of the SF Fed, I will always remember the flight back from DC with head of HR at SF Fed.
She was the only person that I ever sat next to in a plane that used the $5 or $10/minute Airfone service that has now been given up.
She used the $5 or $10/minute phone to: (drum roll) Check her fricking voicemail.
These people are so detached from the real economy, that they could not identify a real economy if it shoved money down their throat.
Well that was 5 minutes of my life that I'll never get back...
I considered the source and saved my 5 minutes for the comments.
What a bunch of crap...is freakin' Peter Schiff can give an elaborate 1 hour talk on this economic debacle in late 2006, you're telling me that the Fed cannot predict these matters? Christ.....
excuses are a lot like assholes...
hence, the fed are assholes.
This logic is about as sound as the logic contained in this report.
http://www.market-ticker.org/archives/1470-ROFL!-4-Minutes-With-An-Elephant.html
great tune about the Fed from Denninger's site
highly highly highly recommended....
both of those videos are perfect expressions
of my inarticulate rage against central banksters....
i loved both videos....
Sorry for the repeat - Putbuyer beat me to it!
these people suck shit
and prove that we must end the Fed
Got a letter this afternoon from Grayson, sure some others did as well, interesting that he asked questions that he got from the "mailbag".
Hi Ghostfaceinvestah,
Last Friday, I questioned the General Counsel of the Federal Reserve. A bunch of you submitted reasons why you want the Fed audited, and I had your comments in my briefing packet prior to the hearing. One of the constant themes I kept hearing was a rumor that the Fed has been manipulating the markets, so that's what I decided to ask about. I also asked, as Beatrice D. put it in her response, "Who got the money?"
Thanks for those of you who came to the hearing or watched it live.
For those who didn't, please take a moment to watch this video of some of my questioning -- inspired by the thoughts you shared with me -- and then forward this message on to your friends.
We're making this happen.
Regards,
Alan
Wow
In 2007 - the parabolic DOW and S&P heading for the sky. Private Debt doing the same. Real Estate at ridiculaous levels. Dinner Table conversations with teachers and nurses crowing about their big gains in the market.
How obvious can it get that a massive bubble had formed? Who needs detailed modelling for something that obvious.
The timing of the "pop" was a little tricker - I expected mid 2007 but came a bit later than that by a few months.
Their economists should hand their heads in shame.
I believe it's really quite easy to detect bubbles when you're the ones creating them.
As one can plainly prove by farting in a bathtub...
I have to heartily disagree with people that say the members of the Fed are clueless.
These guys know very well what is going on, but do you think for a moment that they want us to know? These are the front-men for the organization that is dedicated to taking profits for themselves and leaving us in the lurch, cold, hungry, and destitute, willing to prostrate ourselves before the altar of their power and wisdom, content to take the crumbs proffered to us because of their largess. All the speeches, white papers, dictums are only the propaganda to aggrandize themselves and paper over their glaring, single-minded purpose, to separate themselves from the huddled masses, to give them their rights as the elite, ruling classes.
Audit the bastards, with an audit team that is independent, competent, and ethical. Then prosecute the lies, the theft, the fraud. Alcatraz (or Devil's Island) might be the perfect place for them after their ill-gained profits are surrendered and sold. Restore the rule of law for all, applied equally to all.
(AIMHO)