The credit rating agencies have more direct and established relations with the debtors than what any individual anonymous investor in the market has and therefore, almost by definition, they will be much slower than the markets in conveying any bad news. This is something that the AAA-bomb takes advantage of as it produces a great aftershock. First the market prices in the new bad news, and then later come the downgrading that forces the bank to hold more equity and so down goes the market even more. What a blast!
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The AAA-bomb resulted directly from the Potemkin ratings the market produced to satisfy the demand created by the regulators (Carlos Molotov Pavlov)
The Alma Mater of those the Joker calls "the schemers"
A central planner’s dream-office... and with a secret "low-risk" leverage-enrichment facility in the basement.
Secretariat of the European Systemic Risk Board… wow!
A book to be published by the Voice and Noise Foundation... perhaps.... if it is not taken out first by some powerful oligopolistic interests.
When?
The whole of this blog was set up in January 2009
Basel’s Banker’s Belladonna
The capital requirements for banks based on perceived risks acts like a hallucinogen in that it increases the sensitivity of the banks to the signals the credit ratings emit.
A powerful tool for slicing and dicing
Ja, Ja, Ja!
I drank the other regulators under the table (with sonofavitch vodka) and made them all forget the history of banks that show that all crisis only happen from excessive investments in what ex-ante is perceived as having a low risk, and never ever from what is perceived as having high risk of default.
If you want to end golf as a sport? Then count on me!
My handicap methods of giving the good players more strokes while taking these away from the bad players would end golf as we know it, in just a few rounds.
A delightfully destructive day at the racetrack
As a self-appointed handicap official I took off the weights from the strongest horses (government and triple-A rated borrowers) and placed them on the weakest (small businesses and entrepreneurs), without even telling the bookies… and total mayhem ensued. What a day! And they still don’t know I caused it! Love it!
I tricked them into considering twice the same info!
Markets and banks already consider the risk info provided in credit ratings when setting their interest rates. So when I tricked my colleagues into also considering the same info for setting the capital requirements for banks they triggered the bomb… as any info considered excessively gets to be wrong.
The finest champagne please!
Let’s celebrate, total victory, the “land of the brave” is now obediently following the wimps of Basel
Potemkin ratings
The AAA-bomb resulted directly from the Potemkin ratings the market produced to satisfy the demand created by the regulators (Carlos Molotov Pavlov)
It´s getting better by the minute
Not only are banks allowed to lend to governments with zero capital requirements, thanks to Basel, but now the Committee of European Banking Supervisors aim to raise the quantity and quality of liquidity buffers by forcing banks to hold significant amounts of “high quality” government bonds.
"Inside Job" an inside job!
Imagine! “Inside Job” a 2 hours Oscar winning documentary on the global bank crisis that touching upon most issues and actors and even spending about ten minutes on the role of cocaine and prostitutes, it does not mention, one single time, the global bank regulator of the Basel Committee! Isn’t that the mother of all inside jobs I’ve managed to do?
His old work place
The Alma Mater of those the Joker calls "the schemers"
His new work place
A central planner’s dream-office... and with a secret "low-risk" leverage-enrichment facility in the basement.
Perhaps his future workplace
Secretariat of the European Systemic Risk Board… wow!
The purpose of this blog
This blog is not created in order to create suspicions about just another conspiratorial plot, but to use the story line of a conspiracy to better explain where the financial world went astray.
In other words though it is very serious do not take the blog too seriously.
In other words though it is very serious do not take the blog too seriously.
That said, the Financial Times silence on the issue, no matter the hundreds of letter I, have written to them about this financial terrorism, is indeed something quite suspicious.
Mercy!
The AAA-bomb will cause more misery and deaths than the two previous A-bombs.
Its power
Some recent measurements have established the destructive force of one current AAA-bomb to be in the vicinity of 50 Madoffs.
Hi hi hi!
The regulators were convinced to lower primarily those capital requirements related to what the big banks did... which was all the growth hormone they needed to turn into too-big-to-fail!
Ho, ho, ho!
Have you seen them running around worrying almost exclusively about default risk when this risk is the most natural risk for a bank; and for the society it really is a benign risk, as just the thought of a world without defaults makes us shiver.
Spreading the virus!
Can you think of something more weakening for a society than selling it the illusion that there are risk free investments and that there are experts who knows where these are?
Seeding doubts in the land of the brave
Capital is coward and greedy. There is nothing it likes to hear so much about than “risk-free-earnings” Sell them that and they will follow you wherever... well even back to Kremlin.
Will we know "the land of the wimps"?
Will we know "the land of the wimps"?
Is anything more central-plannish than central credit rating?
The fact that the credit rating function has been outsourced to private agencies should not be allowed to hide the real dark truth.
Is this the best central planning has to offer?
If we absolutely must have central planning… don’t we deserve something better?
Why do they only impose risk-weights on our banks? Should we not ask for some "purpose-weights" that consider job creation and climate change?
Why do they only impose risk-weights on our banks? Should we not ask for some "purpose-weights" that consider job creation and climate change?
Incapacitating the Empire!
With the GPS their kids will grow without knowing about north, south, west and east and with the credit rating agencies their bankers will grow up not knowing about credit.
What an undercover job!
The plan was all about zapping the testosterone out of the banks, so as to make these go to the no-risk areas, to take care of the needs of those who have no need for banks. Beautiful!
Carlos Molotov Pavlov smells victory
For a bank to lend to an ordinary risk-taking entrepreneur it has to put up 8 percent in capital. For the bank to lend to a government so that a bureaucrat takes the investment decision it is required to have zero capital
And they still don’t get it!
The dollar losses incurred in what was supposed to be of low risk surpasses by far the losses incurred in what was supposed to be high risk… and the financial regulators still don’t get it.
A Stockholm's syndrome?
Once the national regulators have fallen into the AAA-trap they feel so ashamed that the idea of having to discuss it is so awful that they prefer to play along. That could be why the Basel Committee is not mentioned even once in the 1336 pages long reform bill presented to the US Senate or in the 1776 pages long H.R. 4173 financial regulatory Act approved by the House of Representatives.
Incredible!
How grown up intelligent men and women do not realize that financial regulations is an issue of national security.
Even Nobel-prize winners are fooled
Carlos Molotov has fooled many Nobel-prize winners who, even when it is clear that this crisis was detonated by too many investments in the “safest” assets, houses, in the “safest” country, the US, keep muttering about “excessive risk-taking” without realizing that what happened was an excessive and misguided risk-aversion.
The “too big to fail” and the “too few to follow”
Though there are some suspicions these regulators helped the growth of the “too large to fail” banks they still remain in blissful ignorance of that the biggest systemic threat comes from the “too few to follow” credit rating agencies.
Developing countries!
But what are developing countries to do knowing that risk is in fact the oxygen of development and that the minimum capital requirements based on risk signify a de-facto tax on risk?
Are the IMF and the World Bank relevant?
Compare the couple of billions of dollars mobilized by these multilateral with the couple of trillions mobilized by the AAAs
Has anyone seen someone protesting the Basel Committee?
Has anyone seen someone protesting the Basel Committee?
Weakening the resolve of the Empire
Can you imagine what an anxious baby-boomer generation feels when informed that the financial risks could be averted by leaving it all in the hands of some expert credit rating agencies? Pure bliss!
Is this justice?
Madoff got a sentence of 54.900 days, it serves him right, but until now, except for Carlos Molotov Pavlov, we do not even know the name of his fellow regulators and much less have anyone of them had to spend even one weekend doing community services.
Help me write it!
I appreciate all the help you can give me, editing and ideas, so as to be able to tell this fictional story better to help me explain better the underlying realities of our current financial crisis.
perkurowski@gmail.com
perkurowski@gmail.com