Monday, July 16, 2012

Marissa Mayer CEO of Y!

I know Marissa tangentially, and I'm very excited that she's become CEO of Yahoo! I think it will be very interesting to see what she can make of the place after the work started by Carol Bartz and the debacle with Scott Thompson. Thompson was an accounting major from Stonehill, while Mayer majored in symbolic systems from Stanford, so I'm guessing she's much smarter than him. I initially thought he was being setup as some kind of sacraficial lamb, so his resume malfunction was either a brilliant strategy or a moronic blunder. Or both. I'm curious to see what strategic position Marissa will try to move Yahoo! into, as Google is not known for discipline or strategy particularly. And as a friend of mine once said, "there's nothing worse than a smart person who has got lucky".

Friday, July 13, 2012

NGDP Futures: Fairies helping Goldman Sachs

I've written in the past about how the Monetarist idea of NGDP futures is lousy. Monetary policy in general has no mechanism to clearly stimulate (or dampen) economic activity, therefore Monetarist are reduced to talking about magic (the Confidence Fairy) or dressing up fiscal policy and calling it monetary policy. NGDP Futures fits firmly within this established tradition but is also too-clever-by-half, so you can see it getting traction amongst academics. This is how academia works. There's a great post by Michael Sankowski, who seems to have some experience in this area, about why, if this thing were implemented, it would simply generate a giant pay day for Goldman Sachs.
NGDP level futures would almost certainly hand Goldman Sachs and hedge funds a payday worth over $500bn, while giving almost nothing else to the rest of the economy. Either that, or NGDP level futures would never be traded by anyone. There are no other outcomes for NGDP level futures. It’s between some dude pulling down a multi-billion dollar bonus, or nobody trades them. There is no in between. NGDP level futures are such a bad idea I can’t even stand to hear about them – they are offensive to everything I know about how futures markets work. I’ll show NGDP level futures have a host of extremely serious problems, and even worse, one of these serious problems cannot be overcome by any possible futures contract design.
Read the whole thing.

Friday, July 06, 2012


I always thought that LIBOR was like the Federal Funds rate and set by the Central Bank announcing a target, and then working with the Treasury to drain reserves as necessary via open market operations to hit that target.

I was wrong.

The process is like this:
“We had to fix a rate, so I called up all the banks and asked them to send to me by 11 a.m. their cost of money,” he said. “We got the rates, I made an average of them all and I named it the London interbank offer rate.” 
For more than 15 years, the banks set the rate more or less as Mr. Zombanakis described — by throwing out the highest and lowest rates and compiling an average of the remaining ones.
Self reported averages. Craziness! Just set them both to zero and be done with it.