1. Carl Zimmer in his book Parasites Rex writes about what appear to be extraordinarily complex life cycles of parasites. For example, a parasite might enter a person's heel, tunnel to the blood system, circulate a few times before lodging on specific parts of the liver and then and only then grow 20 feet long. I don't know (or much care) about the specific details except to say that the key to such behaviour is (1) a single program of genetic instructions in the form of "if A then squirm, then if B, swim like hell, then if C, stop swimming etc."
In other words, we have a finite set of instructions where the parasite is COMPELLED to react in a specific way to specific stimuli.
2. (1) is very interesting from a risk management point of view. Why? Because where the parasite goes from one species to another in its life cycle, it is merely following a PATH that has been established for many thousands if not millions of generations. In other words, the parasite's apparent complex behaviour actually is quite STABLE in reflection of the environment in which it lives. Thus, the instruction, "When human foot enters the pond sending a chemical signal, parasite will swim like crazy and burrow into the human's heel" could only have become a recipe of survival if lots of humans pass through such shallow waters, and human bodies have very similar circulatory systems down to the molecular chemical taste and smell levels. And, not only do we have a stable single strand set of instructions in the parasite, but we also have apparently (2) RISK PERVERSE behaviours exhibited by the "survival machines carriers" which make up most of the life cycle environment of the parasite. How risk perverse? Well, if a snail say is infected by "mind controlling" parasites (see "Zoombies snails" on YouTube) the snail's behaviour is RISK SEEKING. You'll see the same risk perverse behaviours in other animals infected by parasites, e.g. fish swimming to the surface waters SO IT CAN BE MORE EASILY EATEN by the passing pelican and so on.
3. Let's generalise a bit. If a SET OF INSTRUCTIONS is isomorphic to the ENVIRONMENT OVER TIME, from which the ENTIRE ECOLOGICAL SYSTEM has a lower probability of collapse then each of the LINKS or CROSS-SPECIES INTERACTIONS must each produce a lowering of entropy to the entire system of exchanges. OK, if not a lowering of entropy because in general entropy never decreases in the universe, then there is a LOWERING OF UNCERTAINTY per interaction. Thus, information and communication stability is greatly increased by parasites! At one level, the effect of a parasite on an ecology therefore is to "stitch it together" by reducing the survival strength of an infected individual. At another level of abstraction, the ROTATIONAL or RING SYMMETRY of the parasite's life cycle literally ENABLES an ecological system to continue to exist.
4. Now can these ideas be applied to different phenomena? I suppose yes. It's in making comparisons to other phenomena that Category Theory may help since one of the basic motivations of Category Theory is to ensure that when we do compare two objects, whatever structure we find for the entire system of comparisons holds for each and every object and the morphisms between them. As a fun mental gymnastic, you might think: (1) how the government to bond market interaction is parasitical with (a) the government as parasite or (b) hedge fund as parasite. There are different intensities for the host-parasite relations--from mutual beneficial to commensual to totally mutually destructive. My own view is that someone who is very adept at law and finance and is called a "parasite" should feel chuffed at the inadvertant laudation. The adept parasite, after all, is simply executing excellently on a set rules that fit very well to very real situations. And oh by the way, you can always distinguish someone who has been infected--they wear suits and ties and shinny shoes.
Thursday 29 December 2011
Thursday 24 November 2011
n-Financial Theology: The Ideal, Ideologies and Technical Realisations
1. The Ideal. The ideal comes from nowhere in particular, that is, in a completely isomorphic universe, we assume that no matter how peculiarly particular the circumstances, all those circumstances including the observer of the observed are governed by the same set of laws, which we call altogether, the Law only for convenience since we would certainly meet our end before enumerating all the manifestations of particulars for any arbitrary given conditions within the observable universe. We cannot even begin to imagine that there is something beyond this conceptualisation without appealing to a theology based on inconsistency and the apoira (awe) of the utter incomprehensibility of the particular. It is at this edge that the Individual is ultimately protected not by the natural forces which condemn him or her to a non-infinite interval, but extended beyond the claim of any physics that such Individual exists and SHOULD exist against any and all claims to the contrary. This assertion of personal existence cannot be justified in principle by physics, and is as Aristotle would have probably agreed an object of "practical knowledge"' ie how we are to conduct ourselves as individuals grounded in the IDEALS of virtuous conduct. The anthropologists may tell us that the conduct and behaviours of humans is so varied that there is no one set of beliefs or conventions that are prevalent throughout humanity. Again, this is an argument of ideology and does not resolve into contradiction or throw the burden of proof against those who would assert the existence of the individual as a matter of the ideal. The arguments against the "should" accuse its proponents of arbitrary determination and therefore, "unscientific" in the sense of vaguely formulated or unrealisable. But again, these arguments do not negate the assertion of individual existence. Whatever arguments we have against the Ideal are at different levels of manifestation: (1) the ideological and (2) the technical realisation of the ideal.
2. The Ideological. The ideology is simply "a matter of interpretation." The weaker the premises, the more EXPRESSIVE and INCLUSIVE the interpretation. The ideology is a matter of preference, expression, multiple forms. In many ways, it is of many views. But these many views do not negate the Ideal. They enhance it by providing contextual explanations. It is a basic philosophical error to confuse the Ideal with Ideology. VERY LITTLE IS AT STAKE to choose one ideology over another. It is the realisation of the Ideal which is of utmost importance since it is the realisation-of-truth beyond any ideological consistency that reaches into the Ideal.
3. Technical Realisations. The technical realisation of any particular Ideal is not essential to the existence of the Ideal since the ultimate realisation of Ideals may include their unconscious evolution. No technical realisation is sufficient or necessary to meet the Ideal. qua Ideal. But here is where the fun starts: many languages, many logics, algebras and geometries--all qua Ideal.
2. The Ideological. The ideology is simply "a matter of interpretation." The weaker the premises, the more EXPRESSIVE and INCLUSIVE the interpretation. The ideology is a matter of preference, expression, multiple forms. In many ways, it is of many views. But these many views do not negate the Ideal. They enhance it by providing contextual explanations. It is a basic philosophical error to confuse the Ideal with Ideology. VERY LITTLE IS AT STAKE to choose one ideology over another. It is the realisation of the Ideal which is of utmost importance since it is the realisation-of-truth beyond any ideological consistency that reaches into the Ideal.
3. Technical Realisations. The technical realisation of any particular Ideal is not essential to the existence of the Ideal since the ultimate realisation of Ideals may include their unconscious evolution. No technical realisation is sufficient or necessary to meet the Ideal. qua Ideal. But here is where the fun starts: many languages, many logics, algebras and geometries--all qua Ideal.
Monday 21 November 2011
n-Financial Theology: Morphisms from Aristotle's Canon -- How to Deal with the Ultimate Epistemologies
1. "n-" stands for "natural" and "many an arbitrary way." So when we say "n-Financial" we mean a natural finance and a finance that has many different forms.
2. Understanding Any Particular Thing Requires Universal Predicates. As Aristitle taught us in his Prior Analytics, expanded in his Posterior Analytics and Categories, with a show of how powerful these sorts of fundamental arguments are in his Sophistical Refutations, any description of a thing that is aligned to a science and therefore, a complete understanding of its causes, will have universal predicates. This is how Aristotle solves his master's (Plato's) conundrum regarding how knowledge is possible amongst human beings. The act of knowledge is an actualisation of the potential 'universal predication' embedded within our specification of how anything we can observe actually works. The particular object of reality has necessary and essential characteristics that are obviously part and parcel of universals. The syllogism for Aristotle is an especially well-crafted 3-lined argument that starts with a description of a particular object predicated by a universal, by clever symmetry, leads to conclusions which are also universally predicated and not anticipated as a tautology of the premises. Modern logicians have argued that logic in a deep and big sense is just an ever-expanding tautology, but this is only in its most trivial sense. If one studies Category Theory, one begins to realise that the relation of identity extracted from tautology and re-engineered onto a system of arrow (morphisms) becomes awfully non-trivial because it is in the assertion of identity-in-morphisms systems that we begin to capture the structure of dynamics. Or, as Whitehead says in his Part V of a Final Interpretation, "the eternity of the ever-changing moving moment." In more modern Law and Finance discourse, this means capturing the form of risk in the system of trades. This could be at the bilaterally symmetric level tinged with Hohfeldian legal symmetries, or it can be at the rotational symmetric level, infinite amounts of fiat currency, debt, credit, on-balance and off-balance sheet financial contracts become aggregated and re-aggregated into affine patterns of interlocking legal memes which on the one hand are the grounds for hyper-evolution of product cycles and on the other hand, butterfly sensitive systemic contagion. This world of law and finance aims at financial stability and with each attempt to grow or brake, it overshoots inevitably towards hard default.
2. Understanding Any Particular Thing Requires Universal Predicates. As Aristitle taught us in his Prior Analytics, expanded in his Posterior Analytics and Categories, with a show of how powerful these sorts of fundamental arguments are in his Sophistical Refutations, any description of a thing that is aligned to a science and therefore, a complete understanding of its causes, will have universal predicates. This is how Aristotle solves his master's (Plato's) conundrum regarding how knowledge is possible amongst human beings. The act of knowledge is an actualisation of the potential 'universal predication' embedded within our specification of how anything we can observe actually works. The particular object of reality has necessary and essential characteristics that are obviously part and parcel of universals. The syllogism for Aristotle is an especially well-crafted 3-lined argument that starts with a description of a particular object predicated by a universal, by clever symmetry, leads to conclusions which are also universally predicated and not anticipated as a tautology of the premises. Modern logicians have argued that logic in a deep and big sense is just an ever-expanding tautology, but this is only in its most trivial sense. If one studies Category Theory, one begins to realise that the relation of identity extracted from tautology and re-engineered onto a system of arrow (morphisms) becomes awfully non-trivial because it is in the assertion of identity-in-morphisms systems that we begin to capture the structure of dynamics. Or, as Whitehead says in his Part V of a Final Interpretation, "the eternity of the ever-changing moving moment." In more modern Law and Finance discourse, this means capturing the form of risk in the system of trades. This could be at the bilaterally symmetric level tinged with Hohfeldian legal symmetries, or it can be at the rotational symmetric level, infinite amounts of fiat currency, debt, credit, on-balance and off-balance sheet financial contracts become aggregated and re-aggregated into affine patterns of interlocking legal memes which on the one hand are the grounds for hyper-evolution of product cycles and on the other hand, butterfly sensitive systemic contagion. This world of law and finance aims at financial stability and with each attempt to grow or brake, it overshoots inevitably towards hard default.
Tuesday 8 November 2011
Lex Qua Mathesis Universalis
1. Aristotle's Rhetorical canon (inventio, dispositio, elocutio, memoria, et pronunctio), Descartes' Discours Sur la Methode, and Leibniz' mathesis universalis, urge us to learn power languages or codes, and thus to lever right principle into right action. But maybe the best we can do is merely reformulate in a more consistent manner and in a pleasingly beautiful form, grammatical rules, like Panini's integration of Sanskrit grammar setting out a whole new programme for a language culture. This is the most that social science or human science can do--alter cultures. The protons remain the same forever, it's the social patterning that is changeable as the winds.
Monday 31 October 2011
N-Financial Theology: The Extremely Useful Pullback Pasting Lemma - Notes
1. Pullback Square. Let P, A, B and C be Objects (Categories) in a category such that we have the following morphisms (functors) P->A, P->B, A->C, B->C. Visually, this is a pullback square where P, A, B and C are corner vertices. We can write this as
P = A xC B
2. Pullback Pasting Lemma. Assume the facts of 1 above and A->A1, C->C1, and A1->C1. So it looks like we have two adjacent squares that form a rectangle. The pullback pasting lemma states that given this "two adjacent squares," where the right square is a pullback, then the left square is a pullback if and only if the entire rectangle of two adjacent squares has a pullback.
3. Applying the Pullback Pasting Lemma (PPL) to the Structure of Laws. PPL applied to the interpretation of laws, we have the following three stages.
(1) Interpretation as a Matter of Conceptual Binary Operation
Here, Hohfeldian symmetries apply setting out the jurisprudential algebra for the calculation of legal results under the framework assumptions of Anglo-American common law. Substantive interpretation of the laws applied to particular facts follows a calculus of reifying non-legalised facts to the quanta of Hohfeldian legal relations. Slogan: what is the most real in the practice of the laws, in the very action of the laws is in the phenomenology of human actors driven by the professional discourse which is underlined by a clarifying code.
(2) Enactment and Interpretation of the Laws is Surfacetial Forming Arbitrary Series and Sequences of Conjunctions called Objects.
Between objects (legal events), we have morphisms of Time (t) and Space (s). Time is universal linear (Euclidean and pre-Reimann) and space is a minimum 3 degrees of freedom and up to and including an infinite (omega) fractal dimension of 4. To illustrate, a mere 3-dimensional location is stationary rigid body in a Newtonian-Kantian cosmogony. A 3+ fractal dimensional legal and financial object will "spread" itself over more and more possibilities of conventional space. The limit is reached at a convergent infinity fractal 3.999... which covers the entirety of all possible 3-dimensional space configurations. The 4-fractal dimensional object is for all intents and purposes the adjunction of Aristotle's unmoved mover found in Book XII of his Metaphysics.
(3) PPL Allows Decomposition of Surfacetial Structure to (a) First Pasting to Transformation of Potentially Similar Legal Objects to Categories of Isomorphically Conjoined Categories and (b)Second Pasting where Maximal Compression of all of (a) results in a singular omega object which is the generalised category of isotropic infinitude or simply, emptiness.
4. To illustrate what's going on in 3, imagine square tilings with an arbitrary square having its four corners labelled P, A, B and C, such that we have the four sides converted into morphisms, P->A, P->B, A->C and B->C. Now imagine another square where the B->C is the same as P1->A1, and we have the other three sides of the second square labelled as P1->B1, A1->C1 and B1->C1. Now imagine "pulling back" C so that it appears above the plane formed by P, A and B. Now visualise how the second square is merged to the first square. Note how C and C1 are separate points. The PPL can be read so that if we begin with a pullback in the second square, a pullback will occur in the first square if there is a pullback for the entire rectangle. This means that C and C1 will be into the same point (!) that is, that the two squares can share the same conceptual result although starting from different objects. Achieving precisely the same result as a matter of structural indulgence is extremely suggestive for a theory of law and finance.
P = A xC B
2. Pullback Pasting Lemma. Assume the facts of 1 above and A->A1, C->C1, and A1->C1. So it looks like we have two adjacent squares that form a rectangle. The pullback pasting lemma states that given this "two adjacent squares," where the right square is a pullback, then the left square is a pullback if and only if the entire rectangle of two adjacent squares has a pullback.
3. Applying the Pullback Pasting Lemma (PPL) to the Structure of Laws. PPL applied to the interpretation of laws, we have the following three stages.
(1) Interpretation as a Matter of Conceptual Binary Operation
Here, Hohfeldian symmetries apply setting out the jurisprudential algebra for the calculation of legal results under the framework assumptions of Anglo-American common law. Substantive interpretation of the laws applied to particular facts follows a calculus of reifying non-legalised facts to the quanta of Hohfeldian legal relations. Slogan: what is the most real in the practice of the laws, in the very action of the laws is in the phenomenology of human actors driven by the professional discourse which is underlined by a clarifying code.
(2) Enactment and Interpretation of the Laws is Surfacetial Forming Arbitrary Series and Sequences of Conjunctions called Objects.
Between objects (legal events), we have morphisms of Time (t) and Space (s). Time is universal linear (Euclidean and pre-Reimann) and space is a minimum 3 degrees of freedom and up to and including an infinite (omega) fractal dimension of 4. To illustrate, a mere 3-dimensional location is stationary rigid body in a Newtonian-Kantian cosmogony. A 3+ fractal dimensional legal and financial object will "spread" itself over more and more possibilities of conventional space. The limit is reached at a convergent infinity fractal 3.999... which covers the entirety of all possible 3-dimensional space configurations. The 4-fractal dimensional object is for all intents and purposes the adjunction of Aristotle's unmoved mover found in Book XII of his Metaphysics.
(3) PPL Allows Decomposition of Surfacetial Structure to (a) First Pasting to Transformation of Potentially Similar Legal Objects to Categories of Isomorphically Conjoined Categories and (b)Second Pasting where Maximal Compression of all of (a) results in a singular omega object which is the generalised category of isotropic infinitude or simply, emptiness.
4. To illustrate what's going on in 3, imagine square tilings with an arbitrary square having its four corners labelled P, A, B and C, such that we have the four sides converted into morphisms, P->A, P->B, A->C and B->C. Now imagine another square where the B->C is the same as P1->A1, and we have the other three sides of the second square labelled as P1->B1, A1->C1 and B1->C1. Now imagine "pulling back" C so that it appears above the plane formed by P, A and B. Now visualise how the second square is merged to the first square. Note how C and C1 are separate points. The PPL can be read so that if we begin with a pullback in the second square, a pullback will occur in the first square if there is a pullback for the entire rectangle. This means that C and C1 will be into the same point (!) that is, that the two squares can share the same conceptual result although starting from different objects. Achieving precisely the same result as a matter of structural indulgence is extremely suggestive for a theory of law and finance.
Thursday 6 October 2011
n--Financial Theology: Some Precise Notation - Hohfeldian Symmetries - Fundamentals of Human Protection Systems - Notes 16 to 30
HOHFELDIAN SYMMETRIES - PROTECTING HUMAN BEINGS WITHIN THE STRUCTURE OF LAWS: Notes 16 to 30
16. Hohfeldian Symmetries - Introduction.
Hohfeld did not call his legal theory symmetrical. However, it obviously is. He defines the fundamental legal relations as if they were elements of the periodic table of all possible molecular legal structures. This sense of fundamental legal order suited him as one who studied chemistry before studying the law. Just as there were many different versions of the periodic table and not without controversy until many other researchers corrected and codified the table, so too we have many attempts to "explain Hohfeld's legal relations."
17. Faithfulness of Extension.
Fascinating though this legal archaeology be, we shall extend Hohfeld's elemental insights by extending them in a way which he could not and did not foresee. In brief, Hohfeld's schema locks onto (1) jural opposites and (2) jural correlatives. We shall show that there is an underlying rotational permutation symmetry that links both, which is obvious under symmetry analysis, and that Hohfeld did not quite understand how symmetric his schema was. We improve his schema by suggesting a slight adjustment, and extend his essentially, monadic and dyadic schema to the triadic and thereby, hopefully achieving some resolution of how legal structures are incorporated in social structures. This theoretical extension of Hohfeld using symmetric ideas into the realm of the social is as far as I can tell, novel.
18. Why We Need Not Relax Hohfeldian Premises
Many theorists have tried to extend Hohfeldian theory into political and sociological analysis and in doing so, they relax his premises. For example, by saying that the elemental legal relation such as "rights can be applied to defined groups or bodies such as corporations" we have a vitiated version of Hohfeldian theory. A close reading of Hohfeld shows that he would have either despaired or rejected such modification since it leads to legal calculations which ignore the fundamental human-to-human relationships and therefore, misses the practical mark which Hohfeld felt was essential to any jurisprudence worth calling a theory. Thus, although Hohfeldian jurisprudence may seem abstract and unworldly, Hohfeld was at pains to say that any jurisprudential theory that did not improve the lot of practice was really quite useless. We take the same view here with our theories. So, we shall remain faithful to his elemental schema, and where we recommend improvements, they are but slight re-arrangements consistent with symmetric principles and where we extend, we build on his foundations keeping his theory intact and whole, ready for an enlarged application to more complex social phenomena including finance and matters such as credit, banking, sovereign and global financial risk.
18. Hohfeld's Schema of Jural Opposites and Jural Correlatives
Hohfeld's legal elements are very simple. There are essentially four positive elementary legal relations:
(1) right
(2) privilege (or liberty)
(3) power and
(4) immunity.
From these four, we can construct their JURAL OPPOSITES, which are respectively,
(5) no-right
(6) duty
(7) disability and
(8) liability.
From the elementary positive legal relations, we can also construct their correspondent JURAL CORRELATIVES, which are respectively:
(9) Duty. (= 6)
(10) No-right (= 5)
(11) Liability. (= 8)
(12) Disability (= 7)
19. The Monadic Perspective of Jural Opposites - Taking Cue from Aristotle's Canon
Imagine you are Aristotle, establishing the fundamental principles of logic or you are Levi-Strauss investigating the thought processes of your fellow human beings. How do we think about anything at all. How would you begin?
Aristotle begins just as Hohfeld does and vice versa (so that the structure of their conceptualisations could literally be called isomorphic). Both begin with OPPOSITES. Aristotle's logic features the "excluded middle," that is, something cannot be x and not-x at the same time if we are talking about essential characteristics of being. Later, in fact much later, the logicians in the 20th century clarify this distinction somewhat by using existential modifiers, but that's another story. For our purposes, it would be sufficient if we were to imagine that jural opposites are constructed LOGICALLY from the perspective of a single human being. We call this singular perspective MONADIC.
20. Jural Opposites: RIGHT versus NO-RIGHT
So, for example, given the concept of right or claim for something x, what is the opposite of this in the law? Hohfeld's answer is "no-right." This is indeed a logical opposite to right and it seems quite trivial. But let's define the other three positive legal relations and their opposites.
21. Jural Opposites: PRIVILEGE versus DUTY
Privilege, which means having no duty to perform x, has the opposite, the duty to perform x. Privilege can also be expressed as liberty, which means freedom from doing x, and the opposite would again be having a duty to perform x.
22. Jural Opposites: POWER versus DISABILITY
Power means having the ability or capability to do x. Its opposite is the inability to do x, or the disability to do x. Many times financial lawyers do not make such a clean distinction between right and power. Just below we shall see that this is a practical error.
23. Jural Opposites: IMMUNITY versus LIABILITY
Finally, immunity means that a particular law or laws should not apply to you while its opposite simply means that a particular law or laws shall apply to you. When a law applies to you, we say you are liable. Most of the time, we think of liability in the negative sense of "potential liability" as in being potentially liable for damages in case of civil litigation. But liability can also be thought of positively as when a testator signs a will, providing for a bequest to the community, the community is in a sense liable to receive the gift upon the testator's demise. For our purposes of investigating the structure of laws and finance, negative liability corresponds to the superficial notion of legal risk while the more fully formed sense of liability, inclusive of negative and positive liability is isomorphic to the modern financial concept of risk. That is, financial risk incorporates both negative and positive results to the one carrying the risk. Seen from the monadic perspective, this wholistic risk is "perceived risk" (a fundamental constant that forms one of the dimensions to the Risk Symmetries Framework, see in a future note).
24. Jural Correlatives - The Dyadic Perspective
Given the logical definitions provided by jural opposites, which are simply four legal elements and their logical opposites, no different from saying, x and not-x for each of the four positive legal relations, we may naturally ask, "But what happens under the cover of the operation of the black letter laws?" And here, Hohfeld shows his genius for simplification but not so simple as to descend to the level of triviality or absurdity.
He answers this question by simply imagining two persons mediated by a common legal relation which can itself be characterised by CORRELATIVE legal relations. So, the main point of differentiation between jural opposites and jural correlatives is the NUMBER of parties involved. For jural opposites, it is an Aristotelian contemplating the logical space of legal definitions from his own selfish perspective where nobody need exist except himself, and therefore these legal relations can cover the entirety of legal space for the Monad. But for jural correlatives, the world is re-imagined to two persons,.
25. Protecting the Humans
And we emphasise that Hohfeld was adamant that he meant "human persons" because no matter what legal entity may be involved in say litigation where laws are interpreted and tested, the ultimate legal actors where legal relations reside are in individuals. In a strong sense, Hohfeld's stance on the underlying necessary requirement that legal relations remain with humans and not artificial legal entities means that (1) his legal theory is intended to protect humans and (2) apparently complex legal relations which go to the question of substance versus form for Hohfeld always comes down to an analysis of the legal relations involving real and actual human beings. Those critics of Hohfeld who would relegate Hohfeldian legal theory to merely mechanical operations of black letter laws would completely misunderstand the deep humanistic tradition which Hohfeld 's system seeks to protect. Further on, we will apply Hohfeldian analysis to instances of market abuse and regulatory such as the flash crash of May 6, 2010 [see: http://www.zerohedge.com/news/zero-hedge-kindly-requests-immediate-resignation-mary-schapiro-gross-breach-professional-respon]
26 Hoheldian Jural Correlatives - Two Perspectives of a Single Legal Relationship = Two Jural Correlatives
The practical aspect of Hohfeld's jurisprudence begins to reveal itself with jural correlatives since they all involve situations where at least two different parties are engaged in a human-to-human legal relationship. The legal relationship can can be viewed from one or the other party's perspective. For example, Corbin, a student of Hohfeld took the simplest of legal relations, that of the contract, and applied the Hohfeldian right versus duty jural correlatives. The contract is the legal relationship, and it is composed of a legal relation called "right" held by one party and another legal relation called, "duty" by the other party. Later, we shall introduce a simple and cogent "arrow" notation borrowed from Category Theory for these relations.
27. Jural Correlatives: RIGHT v. DUTY
The right versus duty relationship is probably the most prevalent of all legal relationships in Western law, that is, the common law and civil law legal systems that circumscribe the world. To find a right versus duty jural correlative, all one need do is: (1) identify the party who has the claim of x and (2) identify the other party who has the duty to perform x. So long as one has identified the parties and their respective right to claim x and duty to do x, one has described the jural legal relations. As a preview to Category Theory, let us call one party, A, and the other party, B. The right or claim to x is a morphism from A to B, and the duty to do x is a morphism from B to A. So,
r = right
A ------------------->B
<------------------
d = duty
The nice thing about Category Theory diagrams is that we can readily generalise and see the austere structure of all the various relationships. We have much more to say about the applicability of Category Theory to law and finance later.
28. Jural Correlatives: PRIVILEGE v. NO-RIGHT
If we ramp up a bilateralized right, that is, a right which implies a context of another who has a duty, into a context where the assumption of the parties involved is that a certain party has a liberty that applies whether or not there is any conscious agreement amongst the parties, then we have a privilege that is more powerful or more generalised that a mere right. The holder of a privilege implies a social context where the others who stand in relation to the privilege holder have no right to assert that the holder of the privilege has no such privilege. One of the points of this rather convoluted description is that the the privilege holder and the others standing in direct relationship to the holder asserting the privilege X simply do not have any claim to X. The relation of one who has the privilege of X to the one who has no-right to deny the other of the privilege of X is not merely incapable under the law, rather the one having no-right simply cannot pinpoint the exact claim since such claimed has been in a strong sense been "defined away," that is, such right does not exist in the law. This is different from being incapable of asserting a right that does exist. So, strictly speaking having a no-right is not the same as having a disability or incapability under the law. Having no-right means not even being able to specify the legal or equitable claim. In a strong sense, the Law as a system the specific claim when we say a person has no-right.
29. Jural Correlatives: POWER v. LIABILITY
The correlative of power versus liability is an ingenious distinction which is directly analogous to Aristotelian principles of potentiality and potential actuality. When a contract refers to a right which may be exercised in the future, the fact that bit is not being exercised now and that it could (potentially) be exercised in the future means that the purported right is actually a power. At the time the power is created, for example, as in a power of attorney, there is simultaneously created a liability in the other party. This liability is very much like the modern financial -economic concept of risk, where it can have either a negative or positive value. It is this very legal notion of liability which maps isomorphically to the financial-economic concept of risk that allows us to build bridges between legal and financial discourse, and most importantly, to appropriate Category Theory as a substantive formalism that can map the legal and financial implications of financial instruments, regulatory interpretation, compliance, and critique under one integrative programme language.
30. Jural Correlatives: IMMUNITY v. DISABILITY
What is immunity that it should be able to disable the application of law? In other words, does the concept of immunity incorporate exceptionality to the rule of law or is it provocatively implicating naked power against the application of law? Legal theorists such as Gerdht and Negrii have argued for the concept of "exceptionality" as the new feature of law as it is performed at the edges of global empire. Grand words. More prosaically, western legal systems have always recognised the limits of application of particular laws to particular conditions, and the particularities of the laws as opposed to the Law require subtle differentiation, of conceiving at least to the of isomorphism exactly how a particular law might potentially apply to a particular set of circumstances (e.g. agency, contract, tort, criminal) and accorded to particular types of people (e.g. trustees, regulators versus beneficiaries and regulates). In this specification created by particular laws, we have in a strong sense the identification of situations (circumstances and types of people) where the particular law does not apply. These might be called the negative interstices where a particular law may not by definition, apply. Now these negative interstices in the most obvious and glaring form indicate or evidence hierarchy, where one's position is endowed with certain immunities. At the same time as a particular position is "announced" or "made known," all the other subjects to the legal system in question are disqualified from applying a law that would have been applied to any other person in the land except for the person holding such immunity. This is not exceptionality of the legal system per se writ large, rather it is the application of a well-wrought and long established mechanism of the law that corresponds to hierarchical position and if across generations to status.
16. Hohfeldian Symmetries - Introduction.
Hohfeld did not call his legal theory symmetrical. However, it obviously is. He defines the fundamental legal relations as if they were elements of the periodic table of all possible molecular legal structures. This sense of fundamental legal order suited him as one who studied chemistry before studying the law. Just as there were many different versions of the periodic table and not without controversy until many other researchers corrected and codified the table, so too we have many attempts to "explain Hohfeld's legal relations."
17. Faithfulness of Extension.
Fascinating though this legal archaeology be, we shall extend Hohfeld's elemental insights by extending them in a way which he could not and did not foresee. In brief, Hohfeld's schema locks onto (1) jural opposites and (2) jural correlatives. We shall show that there is an underlying rotational permutation symmetry that links both, which is obvious under symmetry analysis, and that Hohfeld did not quite understand how symmetric his schema was. We improve his schema by suggesting a slight adjustment, and extend his essentially, monadic and dyadic schema to the triadic and thereby, hopefully achieving some resolution of how legal structures are incorporated in social structures. This theoretical extension of Hohfeld using symmetric ideas into the realm of the social is as far as I can tell, novel.
18. Why We Need Not Relax Hohfeldian Premises
Many theorists have tried to extend Hohfeldian theory into political and sociological analysis and in doing so, they relax his premises. For example, by saying that the elemental legal relation such as "rights can be applied to defined groups or bodies such as corporations" we have a vitiated version of Hohfeldian theory. A close reading of Hohfeld shows that he would have either despaired or rejected such modification since it leads to legal calculations which ignore the fundamental human-to-human relationships and therefore, misses the practical mark which Hohfeld felt was essential to any jurisprudence worth calling a theory. Thus, although Hohfeldian jurisprudence may seem abstract and unworldly, Hohfeld was at pains to say that any jurisprudential theory that did not improve the lot of practice was really quite useless. We take the same view here with our theories. So, we shall remain faithful to his elemental schema, and where we recommend improvements, they are but slight re-arrangements consistent with symmetric principles and where we extend, we build on his foundations keeping his theory intact and whole, ready for an enlarged application to more complex social phenomena including finance and matters such as credit, banking, sovereign and global financial risk.
18. Hohfeld's Schema of Jural Opposites and Jural Correlatives
Hohfeld's legal elements are very simple. There are essentially four positive elementary legal relations:
(1) right
(2) privilege (or liberty)
(3) power and
(4) immunity.
From these four, we can construct their JURAL OPPOSITES, which are respectively,
(5) no-right
(6) duty
(7) disability and
(8) liability.
From the elementary positive legal relations, we can also construct their correspondent JURAL CORRELATIVES, which are respectively:
(9) Duty. (= 6)
(10) No-right (= 5)
(11) Liability. (= 8)
(12) Disability (= 7)
19. The Monadic Perspective of Jural Opposites - Taking Cue from Aristotle's Canon
Imagine you are Aristotle, establishing the fundamental principles of logic or you are Levi-Strauss investigating the thought processes of your fellow human beings. How do we think about anything at all. How would you begin?
Aristotle begins just as Hohfeld does and vice versa (so that the structure of their conceptualisations could literally be called isomorphic). Both begin with OPPOSITES. Aristotle's logic features the "excluded middle," that is, something cannot be x and not-x at the same time if we are talking about essential characteristics of being. Later, in fact much later, the logicians in the 20th century clarify this distinction somewhat by using existential modifiers, but that's another story. For our purposes, it would be sufficient if we were to imagine that jural opposites are constructed LOGICALLY from the perspective of a single human being. We call this singular perspective MONADIC.
20. Jural Opposites: RIGHT versus NO-RIGHT
So, for example, given the concept of right or claim for something x, what is the opposite of this in the law? Hohfeld's answer is "no-right." This is indeed a logical opposite to right and it seems quite trivial. But let's define the other three positive legal relations and their opposites.
21. Jural Opposites: PRIVILEGE versus DUTY
Privilege, which means having no duty to perform x, has the opposite, the duty to perform x. Privilege can also be expressed as liberty, which means freedom from doing x, and the opposite would again be having a duty to perform x.
22. Jural Opposites: POWER versus DISABILITY
Power means having the ability or capability to do x. Its opposite is the inability to do x, or the disability to do x. Many times financial lawyers do not make such a clean distinction between right and power. Just below we shall see that this is a practical error.
23. Jural Opposites: IMMUNITY versus LIABILITY
Finally, immunity means that a particular law or laws should not apply to you while its opposite simply means that a particular law or laws shall apply to you. When a law applies to you, we say you are liable. Most of the time, we think of liability in the negative sense of "potential liability" as in being potentially liable for damages in case of civil litigation. But liability can also be thought of positively as when a testator signs a will, providing for a bequest to the community, the community is in a sense liable to receive the gift upon the testator's demise. For our purposes of investigating the structure of laws and finance, negative liability corresponds to the superficial notion of legal risk while the more fully formed sense of liability, inclusive of negative and positive liability is isomorphic to the modern financial concept of risk. That is, financial risk incorporates both negative and positive results to the one carrying the risk. Seen from the monadic perspective, this wholistic risk is "perceived risk" (a fundamental constant that forms one of the dimensions to the Risk Symmetries Framework, see in a future note).
24. Jural Correlatives - The Dyadic Perspective
Given the logical definitions provided by jural opposites, which are simply four legal elements and their logical opposites, no different from saying, x and not-x for each of the four positive legal relations, we may naturally ask, "But what happens under the cover of the operation of the black letter laws?" And here, Hohfeld shows his genius for simplification but not so simple as to descend to the level of triviality or absurdity.
He answers this question by simply imagining two persons mediated by a common legal relation which can itself be characterised by CORRELATIVE legal relations. So, the main point of differentiation between jural opposites and jural correlatives is the NUMBER of parties involved. For jural opposites, it is an Aristotelian contemplating the logical space of legal definitions from his own selfish perspective where nobody need exist except himself, and therefore these legal relations can cover the entirety of legal space for the Monad. But for jural correlatives, the world is re-imagined to two persons,.
25. Protecting the Humans
And we emphasise that Hohfeld was adamant that he meant "human persons" because no matter what legal entity may be involved in say litigation where laws are interpreted and tested, the ultimate legal actors where legal relations reside are in individuals. In a strong sense, Hohfeld's stance on the underlying necessary requirement that legal relations remain with humans and not artificial legal entities means that (1) his legal theory is intended to protect humans and (2) apparently complex legal relations which go to the question of substance versus form for Hohfeld always comes down to an analysis of the legal relations involving real and actual human beings. Those critics of Hohfeld who would relegate Hohfeldian legal theory to merely mechanical operations of black letter laws would completely misunderstand the deep humanistic tradition which Hohfeld 's system seeks to protect. Further on, we will apply Hohfeldian analysis to instances of market abuse and regulatory such as the flash crash of May 6, 2010 [see: http://www.zerohedge.com/news/zero-hedge-kindly-requests-immediate-resignation-mary-schapiro-gross-breach-professional-respon]
26 Hoheldian Jural Correlatives - Two Perspectives of a Single Legal Relationship = Two Jural Correlatives
The practical aspect of Hohfeld's jurisprudence begins to reveal itself with jural correlatives since they all involve situations where at least two different parties are engaged in a human-to-human legal relationship. The legal relationship can can be viewed from one or the other party's perspective. For example, Corbin, a student of Hohfeld took the simplest of legal relations, that of the contract, and applied the Hohfeldian right versus duty jural correlatives. The contract is the legal relationship, and it is composed of a legal relation called "right" held by one party and another legal relation called, "duty" by the other party. Later, we shall introduce a simple and cogent "arrow" notation borrowed from Category Theory for these relations.
27. Jural Correlatives: RIGHT v. DUTY
The right versus duty relationship is probably the most prevalent of all legal relationships in Western law, that is, the common law and civil law legal systems that circumscribe the world. To find a right versus duty jural correlative, all one need do is: (1) identify the party who has the claim of x and (2) identify the other party who has the duty to perform x. So long as one has identified the parties and their respective right to claim x and duty to do x, one has described the jural legal relations. As a preview to Category Theory, let us call one party, A, and the other party, B. The right or claim to x is a morphism from A to B, and the duty to do x is a morphism from B to A. So,
r = right
A ------------------->B
<------------------
d = duty
The nice thing about Category Theory diagrams is that we can readily generalise and see the austere structure of all the various relationships. We have much more to say about the applicability of Category Theory to law and finance later.
28. Jural Correlatives: PRIVILEGE v. NO-RIGHT
If we ramp up a bilateralized right, that is, a right which implies a context of another who has a duty, into a context where the assumption of the parties involved is that a certain party has a liberty that applies whether or not there is any conscious agreement amongst the parties, then we have a privilege that is more powerful or more generalised that a mere right. The holder of a privilege implies a social context where the others who stand in relation to the privilege holder have no right to assert that the holder of the privilege has no such privilege. One of the points of this rather convoluted description is that the the privilege holder and the others standing in direct relationship to the holder asserting the privilege X simply do not have any claim to X. The relation of one who has the privilege of X to the one who has no-right to deny the other of the privilege of X is not merely incapable under the law, rather the one having no-right simply cannot pinpoint the exact claim since such claimed has been in a strong sense been "defined away," that is, such right does not exist in the law. This is different from being incapable of asserting a right that does exist. So, strictly speaking having a no-right is not the same as having a disability or incapability under the law. Having no-right means not even being able to specify the legal or equitable claim. In a strong sense, the Law as a system the specific claim when we say a person has no-right.
29. Jural Correlatives: POWER v. LIABILITY
The correlative of power versus liability is an ingenious distinction which is directly analogous to Aristotelian principles of potentiality and potential actuality. When a contract refers to a right which may be exercised in the future, the fact that bit is not being exercised now and that it could (potentially) be exercised in the future means that the purported right is actually a power. At the time the power is created, for example, as in a power of attorney, there is simultaneously created a liability in the other party. This liability is very much like the modern financial -economic concept of risk, where it can have either a negative or positive value. It is this very legal notion of liability which maps isomorphically to the financial-economic concept of risk that allows us to build bridges between legal and financial discourse, and most importantly, to appropriate Category Theory as a substantive formalism that can map the legal and financial implications of financial instruments, regulatory interpretation, compliance, and critique under one integrative programme language.
30. Jural Correlatives: IMMUNITY v. DISABILITY
What is immunity that it should be able to disable the application of law? In other words, does the concept of immunity incorporate exceptionality to the rule of law or is it provocatively implicating naked power against the application of law? Legal theorists such as Gerdht and Negrii have argued for the concept of "exceptionality" as the new feature of law as it is performed at the edges of global empire. Grand words. More prosaically, western legal systems have always recognised the limits of application of particular laws to particular conditions, and the particularities of the laws as opposed to the Law require subtle differentiation, of conceiving at least to the of isomorphism exactly how a particular law might potentially apply to a particular set of circumstances (e.g. agency, contract, tort, criminal) and accorded to particular types of people (e.g. trustees, regulators versus beneficiaries and regulates). In this specification created by particular laws, we have in a strong sense the identification of situations (circumstances and types of people) where the particular law does not apply. These might be called the negative interstices where a particular law may not by definition, apply. Now these negative interstices in the most obvious and glaring form indicate or evidence hierarchy, where one's position is endowed with certain immunities. At the same time as a particular position is "announced" or "made known," all the other subjects to the legal system in question are disqualified from applying a law that would have been applied to any other person in the land except for the person holding such immunity. This is not exceptionality of the legal system per se writ large, rather it is the application of a well-wrought and long established mechanism of the law that corresponds to hierarchical position and if across generations to status.
Friday 23 September 2011
n-Financial Theology: Some Precise Notation, Notes 15c - Whistleblower Incentives and Protection
15. Morphisms between Mega-States (continued)
c, Whistleblower Incentives and Protection under the Dodd-Frank Act 2010
Have you been able to draw the morphism?
You have of course four choices. Referring to Note 10, the four Mega-States are:
(1) [I][I]
(2) [I][B]
(3) [B][B]
(4) [B][I]
And the four morphisms between mega-states in the free functor direction (that is, in the direction of increasingly simplified structures of financial transactions) is:
(a) (1)->(2)
(b) (2)->(3)
(c) (3)->(4)
(d) (4)->(1)
In Note 15(a), we showed the Orderly Liquidation Authority (OLA) as the morphism from (2) to (3). The OLA is in a strong sense a catalyser and condenses more bailout to bailout situations.
In contrast, WIP if we were to guess, catalyses and compresses the bailout to innovation mega-state [B][I] to [I][I], that is, it is a (d) morphism.
You might ask why is WIP not (a), (b) or (c)? And why should it be (c)?
WIP is not (a) because it does not is unlikely to cause a bailout. It is not (b) because it does not enhance or reproduce bailouts.
However, there is an argument that WIP could be (c) because (i) instances of WIP could be initiated from a state of [B] to achieve a state of [I]. In other words, there is nothing logically or empirically impossible for the morphism (c) to eventuate from WIP. But the problem with this view is that WIP starts from a state of bailout, which not the case in fact.
All or almost all conceivable WIP scenarios will start from a state of innovation [I] since the informant will literally need to file original information with the SEC and/or the CFTC in order to qualify for the entitlement of a minimum of 10% and up to 30% upon discretion of the authorities of any and all recoveries from whatever legal actions and settlements over $1 million. The characteristic of this state is one of innovative private contracts, where even the government s prone to act as an initiator of bounty-hunting and qui tam in an incentive-based market system.
Therefore, given this market orientation of WIP, it exists as an element in the domain of many possible financial instruments. Thus, it helps seed and proliferate more and more financial innovation. Here, we mention, for instance the potential establishment of litigation funds, new directors' liability insurance, as well as indexes which could inform investors precisely on potential corporate liabilities.
c, Whistleblower Incentives and Protection under the Dodd-Frank Act 2010
Have you been able to draw the morphism?
You have of course four choices. Referring to Note 10, the four Mega-States are:
(1) [I][I]
(2) [I][B]
(3) [B][B]
(4) [B][I]
And the four morphisms between mega-states in the free functor direction (that is, in the direction of increasingly simplified structures of financial transactions) is:
(a) (1)->(2)
(b) (2)->(3)
(c) (3)->(4)
(d) (4)->(1)
In Note 15(a), we showed the Orderly Liquidation Authority (OLA) as the morphism from (2) to (3). The OLA is in a strong sense a catalyser and condenses more bailout to bailout situations.
In contrast, WIP if we were to guess, catalyses and compresses the bailout to innovation mega-state [B][I] to [I][I], that is, it is a (d) morphism.
You might ask why is WIP not (a), (b) or (c)? And why should it be (c)?
WIP is not (a) because it does not is unlikely to cause a bailout. It is not (b) because it does not enhance or reproduce bailouts.
However, there is an argument that WIP could be (c) because (i) instances of WIP could be initiated from a state of [B] to achieve a state of [I]. In other words, there is nothing logically or empirically impossible for the morphism (c) to eventuate from WIP. But the problem with this view is that WIP starts from a state of bailout, which not the case in fact.
All or almost all conceivable WIP scenarios will start from a state of innovation [I] since the informant will literally need to file original information with the SEC and/or the CFTC in order to qualify for the entitlement of a minimum of 10% and up to 30% upon discretion of the authorities of any and all recoveries from whatever legal actions and settlements over $1 million. The characteristic of this state is one of innovative private contracts, where even the government s prone to act as an initiator of bounty-hunting and qui tam in an incentive-based market system.
Therefore, given this market orientation of WIP, it exists as an element in the domain of many possible financial instruments. Thus, it helps seed and proliferate more and more financial innovation. Here, we mention, for instance the potential establishment of litigation funds, new directors' liability insurance, as well as indexes which could inform investors precisely on potential corporate liabilities.
Tuesday 13 September 2011
n-Financial Theology: Some Precise Notation, 1 to 15
1. The brackets [ ] indicate an object.
2. The arrow -> is a morphism, which means some process, transformation, operation or function.
3. B stands for Bailout, and everything implied by that state of the world.
4. [B] means the object of Bailout, which is really just another way of saying Bailout as a state of the world with everything that is implied by that state of the world.
5. We might use [B] or B for the same thing.
6. I stands for Financial Innovation as a state of the world where financial innovation is acceptable, where there is a secondary Market in financial instruments.
7. [I] means the object of financial innovation and all that it means.
8. We write [I]->[B] to mean the financial innovative state of the world is transformed into a world of Bailouts.
9. For our purposes, we can leave out leave out the arrows (although later,we will put them back in) so [I]->[B] can be written as [I][B]. We can simplify further to BI. But for most of the time, in order to remind us of the special states of the world, we will use the bracketed notation.
Got all that?
Now we come to the theoretical parts.
10. If we pars the world into [B] and [I], then we have four possible mega-states of a two state world, as follows:
(1) [I][I]
(2) [I][B]
(3) [B][B]
(4) [B][I]
Note that between two states, we have the morphism of Default.
11. Morphism of Default is the Invariance of Default. It's important to note that we have a special phenomenon which defines the divide between the two objects in each of the mega-states of (1) through (4). That phenomenon is also a morphism and we call it Default. Default is a latent transformation and it is invariant in all four states. for example, notice how default is not only embedded in every contract you enter and perform but also how default must lurk in the shadows of any regime of financial contracts. It cannot go away. Default invariance has nothing to do with whether any particular contract is or is not in default except that each contract has this "quantitative quality" within its particular potentiality (in Aristotelian terms) or coordinate feature as in a Descartean axis. Later we shall see in the "Risk Symmetries Framework" that risk is "Perceived Risk" as the dependent variable to "Definition" which is the independent variable. But we get ahead of ourselves.
12. Invariance of Default leads to the Functor of Default. We shall see that [] objects are categories and the morphism between categories is a functor. So, more properly, where each state of the world [I] or [B] is a category, the functor is Default. Default functors going in the clockwise direction from (1) to (2), (2) to (3), (3) to (4) and (4) to (1) are "free functors" since they tend to add structure. In the anti-clockwise direction, the functors would tend to lose structure and are called forgetful functors.
13. Mini-States Pre- and Post- each State; Critical Key Sequences Ex Ante and Post Hoc. For each state before and each state after default, in other words in the object before and the object after default, we have specific legal and financial elements in some prescribed "order" which we call incremental states or "mini-states." Pre-mini-states to the state [I] is little "i" and written "-[i]", post-mini-state to the state [B] is "[b]+". It is the SEQUENCE of mini-states that correlate to three types of infinite series, which make explicit (1) definitely convergent, (2) definitely divergent and (3) indefinitely divergent phenomena. Having knowledge of which of the three series is involved in the pre- and post-sequence is sufficient to completely describe the structure of the key critical events of CAUSE and EFFECT of any of the States and Mega-States of the Great Cycle of Default. It is important to note that the STRUCTURE of Default has similar patterns through time and space, and that particular personalities and idiosyncrasies are not relevant except as they may be translated into one of three types of infinite series. Any action, behaviour, characteristic which we can name as phenomenon in our epistemology falls within one of the three types of infinity, and it is our ability to determine what type applies and in what sequence pre- and post-state and mega-state that allows us to determine legal and financial structure of the world.
14. Many Steps between Mega-States. The morphism between the mega-states (1), (2), (3), and (4) will simply be "legal and financial transactions" or simply, "transactions."
15. For purposes of study, we can map most any sort of financial regulation as a morphism between different mega-states.
(a) OLA as a Morphism of Potentiality between Mega-State (2) and (3). For example, the Orderly Liquidation Authority of the Dodd-Frank Act is a process of pre-qualification (input criteria) and implementation, from (2) to (3). In other words, from [I][B] -> [B][B]. This two-step process tends to place a resultant emphasis on [B][B], the mega-state (3).
(b) OLA as a Functor of Actuality between Mega-State (2) and (3). A OLA functor of actuality from (2) to (3) results in an acceleration and strengthening of the mega-state (3), which means Bailout to Bailout continues. In other words, governmental control increases geometrically. Fascistic and totalitarian control zooms up and market failure is generally seen in banking failures.
(c) Whistleblower Incentives and Protection (WIP) Provisions of the Dodd-Frank Act.
Exercise: how might WIP fit in the fourfold mega-states?
Answer: next blog.
2. The arrow -> is a morphism, which means some process, transformation, operation or function.
3. B stands for Bailout, and everything implied by that state of the world.
4. [B] means the object of Bailout, which is really just another way of saying Bailout as a state of the world with everything that is implied by that state of the world.
5. We might use [B] or B for the same thing.
6. I stands for Financial Innovation as a state of the world where financial innovation is acceptable, where there is a secondary Market in financial instruments.
7. [I] means the object of financial innovation and all that it means.
8. We write [I]->[B] to mean the financial innovative state of the world is transformed into a world of Bailouts.
9. For our purposes, we can leave out leave out the arrows (although later,we will put them back in) so [I]->[B] can be written as [I][B]. We can simplify further to BI. But for most of the time, in order to remind us of the special states of the world, we will use the bracketed notation.
Got all that?
Now we come to the theoretical parts.
10. If we pars the world into [B] and [I], then we have four possible mega-states of a two state world, as follows:
(1) [I][I]
(2) [I][B]
(3) [B][B]
(4) [B][I]
Note that between two states, we have the morphism of Default.
11. Morphism of Default is the Invariance of Default. It's important to note that we have a special phenomenon which defines the divide between the two objects in each of the mega-states of (1) through (4). That phenomenon is also a morphism and we call it Default. Default is a latent transformation and it is invariant in all four states. for example, notice how default is not only embedded in every contract you enter and perform but also how default must lurk in the shadows of any regime of financial contracts. It cannot go away. Default invariance has nothing to do with whether any particular contract is or is not in default except that each contract has this "quantitative quality" within its particular potentiality (in Aristotelian terms) or coordinate feature as in a Descartean axis. Later we shall see in the "Risk Symmetries Framework" that risk is "Perceived Risk" as the dependent variable to "Definition" which is the independent variable. But we get ahead of ourselves.
12. Invariance of Default leads to the Functor of Default. We shall see that [] objects are categories and the morphism between categories is a functor. So, more properly, where each state of the world [I] or [B] is a category, the functor is Default. Default functors going in the clockwise direction from (1) to (2), (2) to (3), (3) to (4) and (4) to (1) are "free functors" since they tend to add structure. In the anti-clockwise direction, the functors would tend to lose structure and are called forgetful functors.
13. Mini-States Pre- and Post- each State; Critical Key Sequences Ex Ante and Post Hoc. For each state before and each state after default, in other words in the object before and the object after default, we have specific legal and financial elements in some prescribed "order" which we call incremental states or "mini-states." Pre-mini-states to the state [I] is little "i" and written "-[i]", post-mini-state to the state [B] is "[b]+". It is the SEQUENCE of mini-states that correlate to three types of infinite series, which make explicit (1) definitely convergent, (2) definitely divergent and (3) indefinitely divergent phenomena. Having knowledge of which of the three series is involved in the pre- and post-sequence is sufficient to completely describe the structure of the key critical events of CAUSE and EFFECT of any of the States and Mega-States of the Great Cycle of Default. It is important to note that the STRUCTURE of Default has similar patterns through time and space, and that particular personalities and idiosyncrasies are not relevant except as they may be translated into one of three types of infinite series. Any action, behaviour, characteristic which we can name as phenomenon in our epistemology falls within one of the three types of infinity, and it is our ability to determine what type applies and in what sequence pre- and post-state and mega-state that allows us to determine legal and financial structure of the world.
14. Many Steps between Mega-States. The morphism between the mega-states (1), (2), (3), and (4) will simply be "legal and financial transactions" or simply, "transactions."
15. For purposes of study, we can map most any sort of financial regulation as a morphism between different mega-states.
(a) OLA as a Morphism of Potentiality between Mega-State (2) and (3). For example, the Orderly Liquidation Authority of the Dodd-Frank Act is a process of pre-qualification (input criteria) and implementation, from (2) to (3). In other words, from [I][B] -> [B][B]. This two-step process tends to place a resultant emphasis on [B][B], the mega-state (3).
(b) OLA as a Functor of Actuality between Mega-State (2) and (3). A OLA functor of actuality from (2) to (3) results in an acceleration and strengthening of the mega-state (3), which means Bailout to Bailout continues. In other words, governmental control increases geometrically. Fascistic and totalitarian control zooms up and market failure is generally seen in banking failures.
(c) Whistleblower Incentives and Protection (WIP) Provisions of the Dodd-Frank Act.
Exercise: how might WIP fit in the fourfold mega-states?
Answer: next blog.
Thursday 8 September 2011
n-Metaphysics: Time as Apparent Dis-Entanglement and Love as n-Entanglement
1. Prof Kaku on a Discovery programme the other night illustrated "quantum entanglement" in a hilarious way. Take two hotdogs, one with mustard and the other with ketchup. If the two hotdogs interact with other, say they touch, then quantum mechanics says that before you bite into one of the hotdogs, mustard and ketchup is mixed up in both hotdogs, and only when you bite into one ("ah, that's a good mustard dog") that the ketchup dog is absolutely determined. This works vice versa. This also works if the hotdogs are separated in distance as far as the length of the entire universe. This sounds crazy and Einstein called this quantum phenomenon, "spooky action at a distance" because it was and is totally inexplicable.
2. I have been thinking about quantum mechanics and entanglement for about 40 years. It is by far the most accurate physical theory we have. So, I wonder what it means. What kinds of adjustments do we need to make, if any, to our everyday world view if we take quantum mechanics really seriously. There are a bunch of academics working on this in philosophy, maths and physics departments, and their thought experiments are like virtuoso performances which unfortunately are left in manuscript notation and never heard by general audiences. So, popularisers like Prof Kaku may need to resort to slapstick to get certain images across. Here's one image where mathematical wizardy is probably of no use: the concept of time.
3. You know the saying, "Time is God's way of making sure everything doesn't happen at once." Try the following thought experiment. Divide the visible universe in half. Since both halves are touching, they are entangled and therefore, whatever happens in one-half instantaneously affects the other half. Now imagine iterating the form of this argument ALL THE WAY DOWN so the entirety of the visible universe is parsed into oh so many compartments of say Planck's size (for physicists age 7, this is a trivial calculation for the visible universe, but for the entire universe, we just don't know its size over the light speed horizon.) For all intents and purposes, the entire visible universe would be mapped in what physicists call "configuration space" and the evolution of one possible universe through time would be a point moving along this fantastically complex space. Fortunately, we see this possible universe and can map any "rigid body" in this so-called "metric." OK, so far? The following is my killer point.
3. If we take quantum mechanics seriously throughout the thought experiment, then what happens to time? Thermodynamics tells us time is an arrow (non-Abelian) so that dis-order of any observable pattern is greater by any increment of time. But quantum mechanics is telling us something different about the universe. Maybe one way of putting this is to say information about anything and everything in the universe is timelessly preserved at the very edge of the universe. Nuts? If you are curious, you might dip into Leonard Susskind's Black Hole Wars, see:http://www.amazon.com/Black-Hole-War-Stephen-Mechanics/dp/0316016403. It's a very readable and fun book, and the good professor shows us how and why all the information in the universe is plastered onto the surface at the edge of the universe. I wish it were true. Imagine voyaging to the EDGE.
4. But my own intuition about time comes from the Aristotelian and Scholastic thought experiment in 2 above. I don't think you have to go to any distant edge but indeed, if we take the division argument seriously, it is not entirely objectionable that the connection to everything is right here and now. Time is annihilated in n-entanglement, another beautiful word for love.
2. I have been thinking about quantum mechanics and entanglement for about 40 years. It is by far the most accurate physical theory we have. So, I wonder what it means. What kinds of adjustments do we need to make, if any, to our everyday world view if we take quantum mechanics really seriously. There are a bunch of academics working on this in philosophy, maths and physics departments, and their thought experiments are like virtuoso performances which unfortunately are left in manuscript notation and never heard by general audiences. So, popularisers like Prof Kaku may need to resort to slapstick to get certain images across. Here's one image where mathematical wizardy is probably of no use: the concept of time.
3. You know the saying, "Time is God's way of making sure everything doesn't happen at once." Try the following thought experiment. Divide the visible universe in half. Since both halves are touching, they are entangled and therefore, whatever happens in one-half instantaneously affects the other half. Now imagine iterating the form of this argument ALL THE WAY DOWN so the entirety of the visible universe is parsed into oh so many compartments of say Planck's size (for physicists age 7, this is a trivial calculation for the visible universe, but for the entire universe, we just don't know its size over the light speed horizon.) For all intents and purposes, the entire visible universe would be mapped in what physicists call "configuration space" and the evolution of one possible universe through time would be a point moving along this fantastically complex space. Fortunately, we see this possible universe and can map any "rigid body" in this so-called "metric." OK, so far? The following is my killer point.
3. If we take quantum mechanics seriously throughout the thought experiment, then what happens to time? Thermodynamics tells us time is an arrow (non-Abelian) so that dis-order of any observable pattern is greater by any increment of time. But quantum mechanics is telling us something different about the universe. Maybe one way of putting this is to say information about anything and everything in the universe is timelessly preserved at the very edge of the universe. Nuts? If you are curious, you might dip into Leonard Susskind's Black Hole Wars, see:http://www.amazon.com/Black-Hole-War-Stephen-Mechanics/dp/0316016403. It's a very readable and fun book, and the good professor shows us how and why all the information in the universe is plastered onto the surface at the edge of the universe. I wish it were true. Imagine voyaging to the EDGE.
4. But my own intuition about time comes from the Aristotelian and Scholastic thought experiment in 2 above. I don't think you have to go to any distant edge but indeed, if we take the division argument seriously, it is not entirely objectionable that the connection to everything is right here and now. Time is annihilated in n-entanglement, another beautiful word for love.
Wednesday 7 September 2011
LIBERALITY - The Third Moral Virtue of Good Contracts and The Spiritual Commitment of Great Souls
1. The third moral virtue St Thomas borrowed from Aristotle as a criterion for good contracts is liberality. Aristotle's view on liberality is worth reading for he sketches what might be called the munificent character. Most scholars have called this the "magnanimous soul" or "great soul." The major point to keep in mind is that liberality is not just about the quantity or frequency of giving, or in indeed, about the objects of giving, but that it comes from the nature of the person per se. As Aristotle says,
"Further, the liberal man is easy to deal with in money matters; for he can be got the better of, since he sets no store by money, and is more annoyed if he has not spent something that he ought than pained if he has spent something that he ought not, and does not agree with the saying of Simonides."
Source: Aristotle's Nicomachean Ethics, IV, http://www.sacred-texts.com/cla/ari/nico/nico035.
When one maps out the characteristics of the munificent character, and realises that this person is not necessarily materially or financially wealthy, then we might also realise that we have a specific counter-example of the caricatured "self-interested" homo oeconomicus so favoured by Adam Smith through the 20th century economists and those superficial propagandists of pseudo-philosophy like Ayn Rand and Leo Strauss. And we might also recognise prodigality as the opposite of liberality, where immediate indulgence and self-gratification spring from a certain type of character, and not from all characters.
2. There is a school of financial law today that goes by the name "law matters." Its thesis is that even the tinniest legal rule may have a huge effect on society. For example, simple disclosure rules forcing tens of millions of unread pages per month in the US. The idea of law matters is foundational and assumes a network of necessary rules that are linked together such that the operation of one rule affects another, and so on, throughout the system of rules.
3. This is a deeply Aristotelian conception. So, Aristotle's method was simply, OBSERVE what is to discover the parts of the whole. But then we face a conundrum of determining which parts fit with what whole, if at all. Aristotle posed this problem as the one versus the many. The problem echoes down the ages in many guises. For example, in my theoretically preferred approach which is linked to SET THEORY and CATEGORY THEORY, the problem is stated in terms of INTENSIONALITY versus EXTENSIONALITY, and in notation form as "singular attribute" versus "list of elements having said attribute." How a person resolves (or not) the tension of the "one versus many" conundrum says a lot about a person's intellectual preferences and biases. I use to think Hume was correct on this point and that no part is necessarily connected to any other part because the definition of a part was arbitrary. But as I get older I see the point St Thomas was making that the parts-to-whole argument MUST be aligned to a means-to-ends argument because whether we like it or not, we have a moral choice.
4. As Sadao Yoshioka, Shihan in Aikido, use to say, "the Way gets narrower and narrower as you move forward." We live together in a society where each of us has a part to play to the whole and curiously, this part (role) is given sense and becomes meaningful by our relationship to the whole. So, we have looting in London, and we have hedge arbitrage in investment banking. How are these parts related to the whole? Objective science may not give us the satisfactory answer because it can only help us determine the definition of the parts. How many think tank studies do we need before we must act? To have meaning, we need to translate whatever parts we have observed into a means towards an end. This means some kind of intellectual, moral and indeed, spiritual commitment without which no further meaningful action is possible.
"Further, the liberal man is easy to deal with in money matters; for he can be got the better of, since he sets no store by money, and is more annoyed if he has not spent something that he ought than pained if he has spent something that he ought not, and does not agree with the saying of Simonides."
Source: Aristotle's Nicomachean Ethics, IV, http://www.sacred-texts.com/cla/ari/nico/nico035.
When one maps out the characteristics of the munificent character, and realises that this person is not necessarily materially or financially wealthy, then we might also realise that we have a specific counter-example of the caricatured "self-interested" homo oeconomicus so favoured by Adam Smith through the 20th century economists and those superficial propagandists of pseudo-philosophy like Ayn Rand and Leo Strauss. And we might also recognise prodigality as the opposite of liberality, where immediate indulgence and self-gratification spring from a certain type of character, and not from all characters.
2. There is a school of financial law today that goes by the name "law matters." Its thesis is that even the tinniest legal rule may have a huge effect on society. For example, simple disclosure rules forcing tens of millions of unread pages per month in the US. The idea of law matters is foundational and assumes a network of necessary rules that are linked together such that the operation of one rule affects another, and so on, throughout the system of rules.
3. This is a deeply Aristotelian conception. So, Aristotle's method was simply, OBSERVE what is to discover the parts of the whole. But then we face a conundrum of determining which parts fit with what whole, if at all. Aristotle posed this problem as the one versus the many. The problem echoes down the ages in many guises. For example, in my theoretically preferred approach which is linked to SET THEORY and CATEGORY THEORY, the problem is stated in terms of INTENSIONALITY versus EXTENSIONALITY, and in notation form as "singular attribute" versus "list of elements having said attribute." How a person resolves (or not) the tension of the "one versus many" conundrum says a lot about a person's intellectual preferences and biases. I use to think Hume was correct on this point and that no part is necessarily connected to any other part because the definition of a part was arbitrary. But as I get older I see the point St Thomas was making that the parts-to-whole argument MUST be aligned to a means-to-ends argument because whether we like it or not, we have a moral choice.
4. As Sadao Yoshioka, Shihan in Aikido, use to say, "the Way gets narrower and narrower as you move forward." We live together in a society where each of us has a part to play to the whole and curiously, this part (role) is given sense and becomes meaningful by our relationship to the whole. So, we have looting in London, and we have hedge arbitrage in investment banking. How are these parts related to the whole? Objective science may not give us the satisfactory answer because it can only help us determine the definition of the parts. How many think tank studies do we need before we must act? To have meaning, we need to translate whatever parts we have observed into a means towards an end. This means some kind of intellectual, moral and indeed, spiritual commitment without which no further meaningful action is possible.
Wednesday 31 August 2011
A Modest Proposal: The Fed Dead Mice Trade that Saves Greece and Therefore The World [Sarcasm on]
1. Joseph Coterill of FT Alphavile has a couple diagrams of the Finnish proposal to collateralise Greek assets. He discusses the negative pledge problem which basically says that Greece is not allowed to seek further foreign law bonds that are prejudicial to existing foreign law bonds. And if Greece doesn't get a waiver of this clause from the bondholders and then gets another foreign law bond, then it will be in default. Beautiful self snooker.
Source: Joseph Coterill (Aug 30, 2011) http://ftalphaville.ft.com/blog/2011/08/30/664341/finlands-greek-collateral-plan-breaks-negative-pledge/
Coterill then states that the Finns are spinning this negative pledge block into an opportunity to obtain more credit enhancement. So question is who and what will be used for credit enhancement? Earlier today, Zerohedge made the same point from a bit broader perspective:
"So instead the country's banks need direct foreign capital. However, this capital needs hard collateral pledged. Collateral which would have value in a worst case scenario, i.e., liquidation. Instead, what the EFSF has offered as "collateral" is the equity of the very same firms which will be immediately insolvent once this house of cards collapses, sending the bank equity collateral worthless, and buried under billions of debt liabilities, and in turn impairing the ECB which suddenly finds itself with hundreds of billions in worthless Greek paper, making additional funding for Finland, once it finds itself in a liquidity crisis, next to impossible."
Source: http://www.zerohedge.com/news/europes-ponzi-takes-twist-wacky-greek-bank-equity-be-used-loan-collateral
Source: Ibid.
3. How about a super credit enhancement? Why not borrow some AA+ US treasuries using the US Fed recently re-opened swap lines? A fiat currency denominated debt paying 100% value (after whopping fat Swiss commissions of course) for Greek assets. During TARP, the US Fed conducted the "dead mice" trade where it would pay 100% for RMBS having no tradable value. The US Fed could, should and maybe even would again "save" the world by accepting the "dead mice" from Greece. By the way, this does not have a nice ending.
Recommended reading: Kindleberger on Manias, Panics and Crashes.
Source: Joseph Coterill (Aug 30, 2011) http://ftalphaville.ft.com/blog/2011/08/30/664341/finlands-greek-collateral-plan-breaks-negative-pledge/
Coterill then states that the Finns are spinning this negative pledge block into an opportunity to obtain more credit enhancement. So question is who and what will be used for credit enhancement? Earlier today, Zerohedge made the same point from a bit broader perspective:
"So instead the country's banks need direct foreign capital. However, this capital needs hard collateral pledged. Collateral which would have value in a worst case scenario, i.e., liquidation. Instead, what the EFSF has offered as "collateral" is the equity of the very same firms which will be immediately insolvent once this house of cards collapses, sending the bank equity collateral worthless, and buried under billions of debt liabilities, and in turn impairing the ECB which suddenly finds itself with hundreds of billions in worthless Greek paper, making additional funding for Finland, once it finds itself in a liquidity crisis, next to impossible."
Source: http://www.zerohedge.com/news/europes-ponzi-takes-twist-wacky-greek-bank-equity-be-used-loan-collateral
Source: Ibid.
3. How about a super credit enhancement? Why not borrow some AA+ US treasuries using the US Fed recently re-opened swap lines? A fiat currency denominated debt paying 100% value (after whopping fat Swiss commissions of course) for Greek assets. During TARP, the US Fed conducted the "dead mice" trade where it would pay 100% for RMBS having no tradable value. The US Fed could, should and maybe even would again "save" the world by accepting the "dead mice" from Greece. By the way, this does not have a nice ending.
Recommended reading: Kindleberger on Manias, Panics and Crashes.
Good Contracts: Moral Principle 2 - Commutative Justice
1. St. Thomas Aquinas identified 3 virtues which serve as criteria for determining whether a contract qualified as morally good. In a previous note, we detailed the first virtue called Promise-keeping. In this note, we investigate the second virtue, Commutative Justice. And in a future note, the third, liberality.
2. Commutative Justice is the most conceptually mathematical of the three virtues. Commutative simply means that which relates to exchange, substitution or interchangeability. In mathematics, to say something commutes means that we can change the order of operations and obtain the same result. This idea is central to how we think of operations in the abstract, and generally speaking, when we say we can be sure something is the same as another, it is probably because we would also hold that there is a commutative relation to our beliefs. We'll speak a lot more about commutativity when we investigate Category Theory. But for now, we examine St Thomas' not so primitive bifurcated concept of commutative justice. First, the Arithmetic and then, the Geometric.
3. Arithmetic Commutative Justice. The Arithmetic arises in a bilateral exchange formation. When two parties exchange goods for value, the Arithmetic justice is simply that the value between the parties should be relatively equivalent or balanced. The notion of balancing equivalence probably comes from the act of using scales to measure a point of equivalence by approximating the point of equivalence by adding (or subtracting) lesser weights In this way, fairness can be found by the operation of addition. For about 8 centuries, this concept of fairness in bilateral exchange comes back frequently in the law, despite attempts to relegate it into meaninglessness under 19th century morally de-linked interpretations of contracts. See, for example, the doctrine of "nominal consideration" where mere legal recital of a valued for exchange is sufficient to overcome the bar of unfairness. Note also that in more recent consumer contract legislation from the mid-1960's, there are explicit attempts to bring back this sense of fairness where there is very unequal bargaining power between the corporate monopolistic price-setter and debt-addicted consumer slave. In a high powered radical reconceptualisation of Arithmetic Commutative Justice (ACJ, please forgive the acronym because life is too short to spell everything out explicitly), we see its reflection in a Risk Symmetries Framework where the x-axis is Perceived Risk and the y-axis is Definition (i.e. Increments of information) where horizontal line segments divided into equivalent length left and right segments relative to a middle vertical line represent a fair trade of perceived risk. Under a Risk Symmetries Framework, we have the theorem: Equivalent bilateralisation of perceived risk between two parties at the same level of Definition results in a commutative risk trade. This will become clearer much later on--hopefully, I can explain what this means clearly enough so we can use it in a natural way to understand risk in our daily lives. Some of my students know that I have an 80 page unpublished paper on the Risk Symmetries Framework which explains modern finance theory and behavioural finance theory locked up in my drawer which is based on answering the question, "What is the fundamental unit of psychological space that preserves risk?" When I wrote it, I thought it could be based on group theory. Now, I realise that that was much too narrow a view. Anyway, this is a digression. Let us return to commutative justice of the Geometric kind.
3. Geometric Commutative Justice (GCJ). If ACJ involves two parties, then GCJ involves groups of three or more. Just as we are concerned with distribution in ACJ so are we with GCJ. The question is naturally how to distribute equally among many. Aristotle and St Thomas appear to be socially or social structurally conservative on this point. Note when Aristotle uses the term "individual," he means the class of individuals. So distribution to various groups means distribution in proportion to those classes or groups of individuals. Compare the normativity of say Rawls' second formulation of his principle of justice wherein we are asked to imagine the most socio-economically deprived class of individuals in society, and to not implement any law that would do harm to such a group. The Aristotelian-Aquinian position by contrast would say that so long as the distribution to the various groups in society replicated the hierarchical structure of society, that would be considered just. For Aristotle and St Thomas, we have a ready reckoning tool where geometric justice simply means to replicate the interests of those in the existing social hierarchy while for Rawls, everyone is tasked to become a Socratic philosopher questioning every law for the sake of protecting those most vulnerable to its effects. What may be interesting is to determine which groups various presidential candidates intend to replicate. For example, Obama appears to exaggerate the differences between groups in the socio-economic hierarchy (classic class war rhetoric) and for this reason, he appears geometrically commutatively unjust to all groups in society. Strange place to be in? Obviously, back room deals with Wall St and war mongering without Congressional approval just don't add up for all Americans.
2. Commutative Justice is the most conceptually mathematical of the three virtues. Commutative simply means that which relates to exchange, substitution or interchangeability. In mathematics, to say something commutes means that we can change the order of operations and obtain the same result. This idea is central to how we think of operations in the abstract, and generally speaking, when we say we can be sure something is the same as another, it is probably because we would also hold that there is a commutative relation to our beliefs. We'll speak a lot more about commutativity when we investigate Category Theory. But for now, we examine St Thomas' not so primitive bifurcated concept of commutative justice. First, the Arithmetic and then, the Geometric.
3. Arithmetic Commutative Justice. The Arithmetic arises in a bilateral exchange formation. When two parties exchange goods for value, the Arithmetic justice is simply that the value between the parties should be relatively equivalent or balanced. The notion of balancing equivalence probably comes from the act of using scales to measure a point of equivalence by approximating the point of equivalence by adding (or subtracting) lesser weights In this way, fairness can be found by the operation of addition. For about 8 centuries, this concept of fairness in bilateral exchange comes back frequently in the law, despite attempts to relegate it into meaninglessness under 19th century morally de-linked interpretations of contracts. See, for example, the doctrine of "nominal consideration" where mere legal recital of a valued for exchange is sufficient to overcome the bar of unfairness. Note also that in more recent consumer contract legislation from the mid-1960's, there are explicit attempts to bring back this sense of fairness where there is very unequal bargaining power between the corporate monopolistic price-setter and debt-addicted consumer slave. In a high powered radical reconceptualisation of Arithmetic Commutative Justice (ACJ, please forgive the acronym because life is too short to spell everything out explicitly), we see its reflection in a Risk Symmetries Framework where the x-axis is Perceived Risk and the y-axis is Definition (i.e. Increments of information) where horizontal line segments divided into equivalent length left and right segments relative to a middle vertical line represent a fair trade of perceived risk. Under a Risk Symmetries Framework, we have the theorem: Equivalent bilateralisation of perceived risk between two parties at the same level of Definition results in a commutative risk trade. This will become clearer much later on--hopefully, I can explain what this means clearly enough so we can use it in a natural way to understand risk in our daily lives. Some of my students know that I have an 80 page unpublished paper on the Risk Symmetries Framework which explains modern finance theory and behavioural finance theory locked up in my drawer which is based on answering the question, "What is the fundamental unit of psychological space that preserves risk?" When I wrote it, I thought it could be based on group theory. Now, I realise that that was much too narrow a view. Anyway, this is a digression. Let us return to commutative justice of the Geometric kind.
3. Geometric Commutative Justice (GCJ). If ACJ involves two parties, then GCJ involves groups of three or more. Just as we are concerned with distribution in ACJ so are we with GCJ. The question is naturally how to distribute equally among many. Aristotle and St Thomas appear to be socially or social structurally conservative on this point. Note when Aristotle uses the term "individual," he means the class of individuals. So distribution to various groups means distribution in proportion to those classes or groups of individuals. Compare the normativity of say Rawls' second formulation of his principle of justice wherein we are asked to imagine the most socio-economically deprived class of individuals in society, and to not implement any law that would do harm to such a group. The Aristotelian-Aquinian position by contrast would say that so long as the distribution to the various groups in society replicated the hierarchical structure of society, that would be considered just. For Aristotle and St Thomas, we have a ready reckoning tool where geometric justice simply means to replicate the interests of those in the existing social hierarchy while for Rawls, everyone is tasked to become a Socratic philosopher questioning every law for the sake of protecting those most vulnerable to its effects. What may be interesting is to determine which groups various presidential candidates intend to replicate. For example, Obama appears to exaggerate the differences between groups in the socio-economic hierarchy (classic class war rhetoric) and for this reason, he appears geometrically commutatively unjust to all groups in society. Strange place to be in? Obviously, back room deals with Wall St and war mongering without Congressional approval just don't add up for all Americans.
Monday 29 August 2011
Moral Virtue Número Uno: Promise-keeping->Detecting Frausters->Gravest Punishment is Being Laughed Out of Court
1. In the St Thomas Aquinian view of the moral foundations of contracts, there are 3 virtues: (1) promise-keeping, (2) commutative justice and (3) liberality. A contract may be said to be good morally if it satisfies at least one of these criteria. In a previous note, I had defined these virtues. I'd like to argue that fraudsters are simply those who can't keep promises. Now, there is a lot of research on "how and why people lie" but the main points of this note are on "How to detect fraudsters?" and "What to do after detection?"
2. Fraudsters are easily detected by simply checking their references. Madoff, the $60 billion fraudster who got a 150 year jail sentence lied convincingly all the way up to the day he confessed. I heard that Judge Denny Cheng, who handed out the sentence was swayed by evidence showing Madoff's hardened heart. On the day before publicly confessing, a widow with a handicapped daughter told Madoff that she was giving him all her money and that this was all they had to support herself and her daughter. Madoff put his arm around the lady and whispered, "Don't worry. I'll take care of you and your daughter." He took her money and the next day announced to the world he was broke. I researched Madoff (and created a 50-page anti-fraud checklist based on a complaint against Madoff's main feeder fund called Fairfield --this could be useful to investors and fund managers and I have parked it in my computer) and found that one of the reasons he was able to dupe people is because the duped never bothered to check his references! In Europe, he would name 6 US banks and in the US, he would name 6 European banks. The duped never bothered to check. The bankers who did check never did business with Madoff. In today's world, you should be very careful about physical gold, gold funds and hi-return sovereign bond funds. Anyone selling you these are very dangerous, indeed!
3. What to do with a fraudster after you've detected one? This depends on you. Remember a fraudster is a bit charming, so in the majority of meetings, you will end up paying. Remember nothing is for free and that deals that "have no risk" or offer an abnormal rate of return, or something for which you don't need to pay the full price either or both in terms of time or money, are simply "junk." One of the insanely funny things I learned while trading as an investment banker is that I couldn't trust my "boss" or his "boss" to tell me the truth about anything that affected my personal welfare. I learned to take statements such as "believe me" from my superiors to be the strongest sell signals! I recently experienced a very similar incidence of this sort of funny behaviour at a university. And when I use to employ people, I found they would dip their hands in the cookie jar. In governance theory, we call this the agency problem. The classic agency solution is to offer employees a stock option scheme! Laughable, no? Will a stock option scheme eradicate dishonesty, lies, cheating and stealing? I don't think so.
4. Best is to be vigilant. In Aikido, if someone had broken the code of conduct, eg, broken a promise to a Sensei, stolen from the dojo, lied in public etc., the punishment was quite amazing. The punishment wasn't a stripping of one's rank or being thrown out of the dojo or even a demotion. The gravest punishment was to be called before the senior teachers and for the teachers to "laugh." No fraudster wants to be laughed at. It means he or she cannot be taken seriously. Next time you come across a fraudster, try laughing. It usually is disconcerting enough to spill the beans.
2. Fraudsters are easily detected by simply checking their references. Madoff, the $60 billion fraudster who got a 150 year jail sentence lied convincingly all the way up to the day he confessed. I heard that Judge Denny Cheng, who handed out the sentence was swayed by evidence showing Madoff's hardened heart. On the day before publicly confessing, a widow with a handicapped daughter told Madoff that she was giving him all her money and that this was all they had to support herself and her daughter. Madoff put his arm around the lady and whispered, "Don't worry. I'll take care of you and your daughter." He took her money and the next day announced to the world he was broke. I researched Madoff (and created a 50-page anti-fraud checklist based on a complaint against Madoff's main feeder fund called Fairfield --this could be useful to investors and fund managers and I have parked it in my computer) and found that one of the reasons he was able to dupe people is because the duped never bothered to check his references! In Europe, he would name 6 US banks and in the US, he would name 6 European banks. The duped never bothered to check. The bankers who did check never did business with Madoff. In today's world, you should be very careful about physical gold, gold funds and hi-return sovereign bond funds. Anyone selling you these are very dangerous, indeed!
3. What to do with a fraudster after you've detected one? This depends on you. Remember a fraudster is a bit charming, so in the majority of meetings, you will end up paying. Remember nothing is for free and that deals that "have no risk" or offer an abnormal rate of return, or something for which you don't need to pay the full price either or both in terms of time or money, are simply "junk." One of the insanely funny things I learned while trading as an investment banker is that I couldn't trust my "boss" or his "boss" to tell me the truth about anything that affected my personal welfare. I learned to take statements such as "believe me" from my superiors to be the strongest sell signals! I recently experienced a very similar incidence of this sort of funny behaviour at a university. And when I use to employ people, I found they would dip their hands in the cookie jar. In governance theory, we call this the agency problem. The classic agency solution is to offer employees a stock option scheme! Laughable, no? Will a stock option scheme eradicate dishonesty, lies, cheating and stealing? I don't think so.
4. Best is to be vigilant. In Aikido, if someone had broken the code of conduct, eg, broken a promise to a Sensei, stolen from the dojo, lied in public etc., the punishment was quite amazing. The punishment wasn't a stripping of one's rank or being thrown out of the dojo or even a demotion. The gravest punishment was to be called before the senior teachers and for the teachers to "laugh." No fraudster wants to be laughed at. It means he or she cannot be taken seriously. Next time you come across a fraudster, try laughing. It usually is disconcerting enough to spill the beans.
Sunday 28 August 2011
Friday 26 August 2011
n-Financial Theology: Banks at Trimalchio's Feast and How to Hold Members of the US Fed Personally Liable For Misrepresentation under the 1913 federal Reserve Act
1. The CDS spread over libor tells us BARCLAYS is being adjudged worrisome amongst its peers:
Source: http://www.zerohedge.com/news/presenting-warren-archimedes-buffetts-amazing-24-hour-monster-bank-america-due-diligence-sessio
2. Yesterday, Warren Buffet after a day due diligence entered into a sweetheart deal with Bank of America. Remember how Warren saved Goldman Sachs back in 2008? The hoi polloi back then thought if Warren could do it then he was both heroic and patriotic. Now, his move on BAC may be interpreted not as a savvy trade but as one of those moves of a sick empire. My reference here is Trimalchio's Feast in Petronius' Satyricon. [By the way, the best modern translation of that end of Empire novel is Fellini's film rendition.] It's grating to read the management of BAC saying they need no capital and that Warren's capital injection therefore was unnecessary. Then why accept it in the first place? And why allow him such a gigantic upfront premium to get in? For my law and finance students, here's the disclosure document dated August 25, 2011: http://www.sec.gov/Archives/edgar/data/70858/000119312511232422/dex11.htm
For a more journalistic interpretation, see: http://www.bloomberg.com/news/2011-08-26/buffett-s-bofa-investment-is-latest-to-capitalize-on-wall-street-weakness.html
And of course, for a more sarcastic wit and invective which can inform your trading view, see zero hedge: http://www.zerohedge.com/news/presenting-warren-archimedes-buffetts-amazing-24-hour-monster-bank-america-due-diligence-sessio
3. Two other "events" as in Badiou's Being and Event are worth mentioning today: (1) Greece has tapped its emergency loan facility which means really, really, this time we are just a hair away from either a bank run or amalgamation of banks or revolution based on bank-government fraud catching up to depositors who are still crazy enough to hold deposits and (2) Ben Bernanke's Jackson Hole speech which the Market is discounting a "no QE3". Even if he announces a QE3, it is largely irrelevant to the NON-HUMAN BEINGS, because the ALGOS built by 20-year olds have taken over. Look at Dell's 10,000 unhit bids yesterday! The Capital Markets - What use to be the crowning glory of free capitalism ideology has become totally dissociated from productive capital, merely serving as a distraction for the guests at Trimalchio's last dinner.
4. 1, 2 and 3 are data feeds to grand models which might be called EXISTENTIAL MODIFIERS. See for example: Bostrom's works on "existential risk": http://www.existential-risk.org/concept.pdf and The future of humanity: http://www.nickbostrom.com/papers/future.pdf.
There are also a number of complexity theorists seeing a strong correlation between food prices and riots and wars. Duh.
5. A much more interesting form of "for public activist research" would be to see whether the members of the US Fed could be held civilly liable for misrepresentations under Title XII, Ch 3, Subchap XVI, Sec 503. See: http://www.law.cornell.edu/uscode/12/usc_sec_12_00000503----000-.html
Source: http://www.zerohedge.com/news/presenting-warren-archimedes-buffetts-amazing-24-hour-monster-bank-america-due-diligence-sessio
2. Yesterday, Warren Buffet after a day due diligence entered into a sweetheart deal with Bank of America. Remember how Warren saved Goldman Sachs back in 2008? The hoi polloi back then thought if Warren could do it then he was both heroic and patriotic. Now, his move on BAC may be interpreted not as a savvy trade but as one of those moves of a sick empire. My reference here is Trimalchio's Feast in Petronius' Satyricon. [By the way, the best modern translation of that end of Empire novel is Fellini's film rendition.] It's grating to read the management of BAC saying they need no capital and that Warren's capital injection therefore was unnecessary. Then why accept it in the first place? And why allow him such a gigantic upfront premium to get in? For my law and finance students, here's the disclosure document dated August 25, 2011: http://www.sec.gov/Archives/edgar/data/70858/000119312511232422/dex11.htm
For a more journalistic interpretation, see: http://www.bloomberg.com/news/2011-08-26/buffett-s-bofa-investment-is-latest-to-capitalize-on-wall-street-weakness.html
And of course, for a more sarcastic wit and invective which can inform your trading view, see zero hedge: http://www.zerohedge.com/news/presenting-warren-archimedes-buffetts-amazing-24-hour-monster-bank-america-due-diligence-sessio
3. Two other "events" as in Badiou's Being and Event are worth mentioning today: (1) Greece has tapped its emergency loan facility which means really, really, this time we are just a hair away from either a bank run or amalgamation of banks or revolution based on bank-government fraud catching up to depositors who are still crazy enough to hold deposits and (2) Ben Bernanke's Jackson Hole speech which the Market is discounting a "no QE3". Even if he announces a QE3, it is largely irrelevant to the NON-HUMAN BEINGS, because the ALGOS built by 20-year olds have taken over. Look at Dell's 10,000 unhit bids yesterday! The Capital Markets - What use to be the crowning glory of free capitalism ideology has become totally dissociated from productive capital, merely serving as a distraction for the guests at Trimalchio's last dinner.
4. 1, 2 and 3 are data feeds to grand models which might be called EXISTENTIAL MODIFIERS. See for example: Bostrom's works on "existential risk": http://www.existential-risk.org/concept.pdf and The future of humanity: http://www.nickbostrom.com/papers/future.pdf.
There are also a number of complexity theorists seeing a strong correlation between food prices and riots and wars. Duh.
5. A much more interesting form of "for public activist research" would be to see whether the members of the US Fed could be held civilly liable for misrepresentations under Title XII, Ch 3, Subchap XVI, Sec 503. See: http://www.law.cornell.edu/uscode/12/usc_sec_12_00000503----000-.html
Monday 22 August 2011
n-Financial Theology versus n-Financial Wars -- Vitae Summa Brevis
1. Since 99.99...% (practically all) of our moneyed transactions are based on debt, debt as a convention decreed into existence from nothing has become our reality. For the last great word on how we realise consciousness from the reality created by convention, see Nagarjuna's Mulamadhyamakakarika (Fundamental Verses of the Middle Way). Debt bondage is what made Buddha come back to this plane of existence to extinguish all the promises he had made in all of his previous incarnations, and only then, could he move on as genuinely liberated. Socrates the Enlightened Master of Western philosophy startled all those at his hemlock induced death, by rising one last time to say, "Crito, we owe a cock to Asclepius. Please don't forget to pay the debt." I always tell young people to pay off their mortgages early to achieve partial financial freedom. Note how Obama would have more and more people enslaved by delaying their payments due. I'm sure he thinks he is doing the right thing which means I believe he is delusional but really what he is advocating is MORAL BANKRUPTCY.
2. Now bondage has a bit more impersonal and generalised meaning in this BOND-AGE. Fiat money is no more than the desires of civilisation through the BELIEF in writing on paper and electronic phosphorescence. It is both the greatest convenience since it is relatively costless and the greatest risk, since if it fails to be believed, it is worthless. Thus, money in the sense of fiat currency and as objects of belief may perhaps best be studied as a subject of SOCIAL ANTHROPOLOGY and/or as a matter of THEOLOGY. Many (most? all?) of the doctrines espoused by politicians, central bankers, investment bankers (i.e., high priests of the swirling academic neighbourhood gangs/thugs who advocate "war" for socio-economic salvation eg PAUL KRUGMAN or reparations of busted business cycles with moderate inflation to signal Americans out of DEPRESSION, such as BEN BERNANKE) cannot even begin to conceive of a world without fiat currency. Why? Because think of what would happen to the world if $600 trillion of derivatives based on fiats needed to be unwound. Maybe nothing returns. After all the equation is: Inconceivable Amount x Inconceivable Unwind = Inconceivable Whatever.
3. What's next? Personally, I keep on bugging my wife for us to buy a small farm with its own well. In any case, I liquidated all investment exposures to fiat back in 2006. There're Irish farmlands plus farm houses for about 70k EURO. "vitae summa brevis spem nos vetat incohare longam" (The total of life's brevity forbids us clinging to long-off hope). Horace, Odes, I.4
2. Now bondage has a bit more impersonal and generalised meaning in this BOND-AGE. Fiat money is no more than the desires of civilisation through the BELIEF in writing on paper and electronic phosphorescence. It is both the greatest convenience since it is relatively costless and the greatest risk, since if it fails to be believed, it is worthless. Thus, money in the sense of fiat currency and as objects of belief may perhaps best be studied as a subject of SOCIAL ANTHROPOLOGY and/or as a matter of THEOLOGY. Many (most? all?) of the doctrines espoused by politicians, central bankers, investment bankers (i.e., high priests of the swirling academic neighbourhood gangs/thugs who advocate "war" for socio-economic salvation eg PAUL KRUGMAN or reparations of busted business cycles with moderate inflation to signal Americans out of DEPRESSION, such as BEN BERNANKE) cannot even begin to conceive of a world without fiat currency. Why? Because think of what would happen to the world if $600 trillion of derivatives based on fiats needed to be unwound. Maybe nothing returns. After all the equation is: Inconceivable Amount x Inconceivable Unwind = Inconceivable Whatever.
3. What's next? Personally, I keep on bugging my wife for us to buy a small farm with its own well. In any case, I liquidated all investment exposures to fiat back in 2006. There're Irish farmlands plus farm houses for about 70k EURO. "vitae summa brevis spem nos vetat incohare longam" (The total of life's brevity forbids us clinging to long-off hope). Horace, Odes, I.4
Saturday 20 August 2011
n-Riots, Spinoza, Cannibalism: Not Prison but Non-PC Love
1. Damasio the neuro-physician in his book, Looking For Spinoza, describes a scene in Spinoza's rather cloistered life where on a beautiful day in the freest of free thinking Holland, an angry mob captured a city official and not only killed him, but ate him.
2. Spinoza hardly ever left his small room and many of the finest minds in Europe would visit him. He had worked out an ethical philosophy which is probably of rank with Aristotle's and according to Damasio, Spinoza's description of human feelings are consistently accurate with current neurophysiological research.
3. But I'm wondering what Spinoza would have made of the London riots in August 2011? Would he have been surprised? Back in Spinoza's time, Holland had just experienced a terrible economic down-turn and people were literally starving. But in London at the time of the riots, the young people were looting shops for kit and goods they could sell on the web, the street or to friends. The kids were "bragging" of their loot as if they were trophies.
4. This reminds me of some anthropological explanations of head-hunting and cannibalism. I've never met a hunt-hunter, but I did meet a student at Oxford who claims that his great-grand-mother told him that "white meat is a bit sweet like succulent pig." Hmm. And I devoured (pun intended) a number of ethnographies on tribes in Papua New Guinea. The explanations for head-hunting differed radically but all revolved around (1) some liminal rite determining a division between in- and out-group where the actor would need to enact or participate in particular prescribed behaviours, and (2) some rite of incorporation where the actor upon completion of said prescribed acts, would then enjoy certain new "rights," "privileges," and "immunities." By performing the prescribed acts, the actor moved from outside to the inside group. As you can imagine, most of these ritualised acts appeared rather dangerous.
5. There are some commentators saying that riots can be explained in terms of a "gangsta culture." I think that this would be at best a very loose affiliation--much like saying one's actions on a Sunday football pitch comes from the fervour of belonging to a particular football team, and not the types of ritualisation that's normally required to become a member of an in-group. But then again, some football parents do bare their teeth!
6. Bottom-line: Will London have more riots? Probably, yes. What can we do to help lessen the risk of future riots? Lock children up until they are 30? Well, there are lots of studies showing that prisons are the best breeding grounds for recidivism. So, no. Locking up children and youths is just stupid in the longer term but convenient to score political points in the short term.
7. A bit of non-PC love is in order from the mum or pop. Oh yes, one question you can always teach children is to ask before taking anything that isn't theirs. If the child doesn't understand this concept then unfortunately you simply have a cannibal on your hands! Sarc/off.
2. Spinoza hardly ever left his small room and many of the finest minds in Europe would visit him. He had worked out an ethical philosophy which is probably of rank with Aristotle's and according to Damasio, Spinoza's description of human feelings are consistently accurate with current neurophysiological research.
3. But I'm wondering what Spinoza would have made of the London riots in August 2011? Would he have been surprised? Back in Spinoza's time, Holland had just experienced a terrible economic down-turn and people were literally starving. But in London at the time of the riots, the young people were looting shops for kit and goods they could sell on the web, the street or to friends. The kids were "bragging" of their loot as if they were trophies.
4. This reminds me of some anthropological explanations of head-hunting and cannibalism. I've never met a hunt-hunter, but I did meet a student at Oxford who claims that his great-grand-mother told him that "white meat is a bit sweet like succulent pig." Hmm. And I devoured (pun intended) a number of ethnographies on tribes in Papua New Guinea. The explanations for head-hunting differed radically but all revolved around (1) some liminal rite determining a division between in- and out-group where the actor would need to enact or participate in particular prescribed behaviours, and (2) some rite of incorporation where the actor upon completion of said prescribed acts, would then enjoy certain new "rights," "privileges," and "immunities." By performing the prescribed acts, the actor moved from outside to the inside group. As you can imagine, most of these ritualised acts appeared rather dangerous.
5. There are some commentators saying that riots can be explained in terms of a "gangsta culture." I think that this would be at best a very loose affiliation--much like saying one's actions on a Sunday football pitch comes from the fervour of belonging to a particular football team, and not the types of ritualisation that's normally required to become a member of an in-group. But then again, some football parents do bare their teeth!
6. Bottom-line: Will London have more riots? Probably, yes. What can we do to help lessen the risk of future riots? Lock children up until they are 30? Well, there are lots of studies showing that prisons are the best breeding grounds for recidivism. So, no. Locking up children and youths is just stupid in the longer term but convenient to score political points in the short term.
7. A bit of non-PC love is in order from the mum or pop. Oh yes, one question you can always teach children is to ask before taking anything that isn't theirs. If the child doesn't understand this concept then unfortunately you simply have a cannibal on your hands! Sarc/off.
N-Financial Theology: The Demonization of the US Fed versus Its Benevolent Deontology
1. If you read the conspiracist literature just for fun or like me, because I find fairy tales and imaginary literature compelling in the way William Blake called such works of poetry as "images of the truth" and here we mean, the truth of the interiority of our minds, the latest blameworthy theme bandied about is the root and handmaiden of evil in the Evil Empire is the US Fed. The media savvy and very popular Aaron Russo released a film documentary on America: From Freedom to Fascism in 2007 which helped the Presidential campaign of Ron Paul, who is again currently running for the Republican nomination. One of Ron Paul's campaign promises is to dismantle the Fed.
2. I have to admit that Russo is a compelling story-teller and rhetorician. See: http://v11.lscache6.googlevideo.com/videoplayback?id=3594925e2e858fa6&itag=7&begin=0&ratebypass=yes&title=Historic+Interview+with+Aaron+Russo,+Fighting+Cancer+and+the+New+World+Order&ip=0.0.0.0&ipbits=0&expire=1313850432&sparams=ip,ipbits,expire,id,itag,ratebypass,title&signature=7B243C2E27F34944EE3298FD66CACD34C29D8596.3E0C3DA5D5F80AD17977D45A7E440379DB83B4B5&key=ck1
And I'm always open to hearing alternative universe views on how the money-banking system SHOULD work as Ron Paul continuously advocates his libertarian (though unquantifiably testable) views. But one might note that although the US Fed operates as a quasi-private institution (the US President appoints council members and sets salary levels), it does make a profit and pays most of it back to the US Treasury in the form of tax. In March 2010, of its $82 billion profit, it paid $79 billion to the Treasury.
3. I don't believe the US Fed is part of an evil cabal or a servant of any particular "bankster" group. It simply has a very difficult job of managing "monetary" policy with very blunt tools. When you think about their powers for even a few minutes, you may see that as a bank all they can do is lend or borrow and pay most of their profits back to the Treasury. They don't directly affect fiscal policy and their attempt to stimulate the economy during recession is again very limited. To say we have to kill the central bank because they are the root of evil ignores the bank's rather benevolent deontology.
4. Basically, the US Fed gives the government SOME TIME to sort out CURRENT messes over a LONGER period of time. This cannot be easily replaced, and without it, many of the fruits of a complex and FREE micro-economy cannot even be realised on a day by day basis without this TIME-TRANSFER-OF-RISK function. The central bank tries to ensure the smooth operation of the money-pump in complex societies. It might be thought of as the life-blood system to Adam Smith's "invisible hand."
2. I have to admit that Russo is a compelling story-teller and rhetorician. See: http://v11.lscache6.googlevideo.com/videoplayback?id=3594925e2e858fa6&itag=7&begin=0&ratebypass=yes&title=Historic+Interview+with+Aaron+Russo,+Fighting+Cancer+and+the+New+World+Order&ip=0.0.0.0&ipbits=0&expire=1313850432&sparams=ip,ipbits,expire,id,itag,ratebypass,title&signature=7B243C2E27F34944EE3298FD66CACD34C29D8596.3E0C3DA5D5F80AD17977D45A7E440379DB83B4B5&key=ck1
And I'm always open to hearing alternative universe views on how the money-banking system SHOULD work as Ron Paul continuously advocates his libertarian (though unquantifiably testable) views. But one might note that although the US Fed operates as a quasi-private institution (the US President appoints council members and sets salary levels), it does make a profit and pays most of it back to the US Treasury in the form of tax. In March 2010, of its $82 billion profit, it paid $79 billion to the Treasury.
3. I don't believe the US Fed is part of an evil cabal or a servant of any particular "bankster" group. It simply has a very difficult job of managing "monetary" policy with very blunt tools. When you think about their powers for even a few minutes, you may see that as a bank all they can do is lend or borrow and pay most of their profits back to the Treasury. They don't directly affect fiscal policy and their attempt to stimulate the economy during recession is again very limited. To say we have to kill the central bank because they are the root of evil ignores the bank's rather benevolent deontology.
4. Basically, the US Fed gives the government SOME TIME to sort out CURRENT messes over a LONGER period of time. This cannot be easily replaced, and without it, many of the fruits of a complex and FREE micro-economy cannot even be realised on a day by day basis without this TIME-TRANSFER-OF-RISK function. The central bank tries to ensure the smooth operation of the money-pump in complex societies. It might be thought of as the life-blood system to Adam Smith's "invisible hand."
Friday 19 August 2011
n-Euro German Swiss Risk Bets--Can we save ourselves from our children's riots?
Source: http://www.zerohedge.com/news/europes-last-resort-very-much-doomed-maginot-line-part-deux
2. You don't need to know a whole lot about European history to understand how vain European projects are. As the financial markets continue their "risk off" trend with rumours of illiquidity now billowing not from the Tragic Greek Chorus but from Switzerland which has taken $200million from the US Fed Swap Line, which may seem infinitely tiny in the scheme of things, but which can be infinitely levered, we have one of four trap doors to enter: (1) the SNP (central bank of Switzerland) genuinely needs US Dollars because even though it can print CHF, it doesn't want any more EURO exposure, and would rather take USD appreciation risk, which maybe means, THEY KNOW THE FED is going to do a QE3; (2) as Tyler Durden believes, the liquidity lines in Europe are in big trouble, and the SNP is just acting as front cover for some European bank(s) which is/are now in acta mortis; or as my wife (no expert in finance, but what a brain) thinks (3) this is a HEAD-FAKE by the SNP to scare off the already terrified Euro-holders from buying any more Swissies. Of course, if the $200mill purchase by the SNP is not a head-fake and they are not try to butress a European bank or banks, then the last possible alternative is (4) one of the two big Swiss banks is in trouble. At this point, if you decide to take a bet, you have a 1 in 8 chance of getting it right. That is, take the 4 choices as equi-probable and (4) again being equi-probable. What's clear is that all choices in the above bad for market sentiment.
3. As our children grow up and realise what we with our banking and political systems have done--basically lie, cover-up, and lie again--they are going to get pissed off. IF WE START TELLING THEM THE HONEST TRUTH NOW, THEY might (pretty please) SPARE US.
Thursday 18 August 2011
Does The Policy of Raising University Tuition Fees in England Meet the Aristotelian Criteria of the Social Good?
1. Aristotle gave us rather specific NON-FINANCIAL-ECONOMIC definitions of the good or virtue. Via St. Thomas Aquinas' interpretation of Aristotelian philosophy in his Summa Theologica, a contract is good if it satisfies one of three virtues: (1) PROMISE-KEEPING which is related to reason, will and ordering human relations such that the promisor is bound to the limits of his intention to the promisee, (2) COMMUTATIVE JUSTICE, which can be either GEOMETRIC which means that distribution is in accordance with hierarchical groupings of society or ARITHMETIC, which means that as a matter of bilateral exchange adjustments can be made to achieve a relatively fair balance of distribution between the two parties; and (3) LIBERALIITY, that the exchange is materially unilateral (uni-directional) with no expectation of return and therefore, no reciprocal obligation on the receiving party. Importantly, much of what we would consider is the good of a contract is bound up with its ends. And having determined its ends, we can work backwards to determine the good of its means. Please don't rely on my word on what St Thomas says about these matters or what I think Aristotle might have said. I'd recommend strongly that you see for yourselves.
2. In England, the new Tory-led-co-opted-Liberal coalition with its tortured sense of quack-economics, has decided to raise tuition fees for university students, giving them the "right" (notice the torturous use of art) to pay for the "duty" of universities providing education for value. The new limit is £9k per year from an old limit of say £3.5k. Students who take advantage of their new rights will be required to start paying back only when they start earning a certain level of income, and there are a number of ways which a university may mitigate the higher tuition fees. For example, Universities can act like good used car salesmen and offer cash rebates to students. Reminds me of a rather ribald ad I heard in the US, "Bring your ass in and get a clean wiper!" It's easy to see that the market value equilibrium will be just the (aggregate average nominal price of the advertised less the discount cash offer) divided by the (discount rate for the average number of years for collection). So, this means, Universities offering the BIGGEST DISCOUNTS will get the most students, so for these FACTORY MODEL STACK EM HIGH universities, the decision will simply be based on a commoditised price (elastic demand curve). For other world-class brand named institutions, no discounts need be provided, and in fact, they could charge a lot more because of their perceived inelastic demand. This means we still have at least a two-tier or three-tier university educational system. The widest spectrum is de facto, from institutions gaining little or no return (high discount providers) to premium brands ("I paid a million bucks for my Patek Philippe degree and it doesn't talk back.") Permit me to give you an example from the unregulated postgraduate degree market.
3. London Business School holds the world's top ranking for its MBA and its Masters in Finance courses. Guess how many applications it receives each year for 2,000 places. About 250,000! If it could sell its database of rejections it could probably make £15 million per year. That's approximately the same gross amount that my University's business school makes for all its undergrad programmes. And these two Universities are only a 5 minute walk from each other.
4. Coming back to Aristotle. Is the tuition fee rise a good thing? In terms of promise-keeping, no. The broken promises of Nick Clegg Liberals to not raise tuition fees make them laughing stock liars and totally untrustworthy. Imagine Nick Clegg saying something like, "I promise NOT to bomb Syria," -- there'd be a war in 24 minutes.
5. How about under commutative justice? I'd argue that the tuition raise does nothing for geometric or arithmetic justice, and if anything makes injustice worse on both counts. For geometric or social level of distribution, students coming from lower income or deprived backgrounds will perceive a relatively higher risk in paying for an education, and therefore, are more likely to not participate, while students from relatively higher income brackets will feel no difference since their rich mums and dads will pay for their way anyway. So, on the geometric measure of justice, the tuition rise fails. With regard to the arithmetic, there is a close argument that the student will now be more discriminating, and therefore, move towards courses which offer the value which the student desires. But again, for a relatively poor student, he or she may still be priced out of the market and therefore, be unable to practically participate in "arithmetical justice."
6. Finally, how about liberality? How about it? Well, frankly, no. No freebies to University students.
7. There you have it. Under all three Aristotelian-Aquinian criteria for adjudging the moral goodness of the tuition fee hike rule, the rule takes a hike.
2. In England, the new Tory-led-co-opted-Liberal coalition with its tortured sense of quack-economics, has decided to raise tuition fees for university students, giving them the "right" (notice the torturous use of art) to pay for the "duty" of universities providing education for value. The new limit is £9k per year from an old limit of say £3.5k. Students who take advantage of their new rights will be required to start paying back only when they start earning a certain level of income, and there are a number of ways which a university may mitigate the higher tuition fees. For example, Universities can act like good used car salesmen and offer cash rebates to students. Reminds me of a rather ribald ad I heard in the US, "Bring your ass in and get a clean wiper!" It's easy to see that the market value equilibrium will be just the (aggregate average nominal price of the advertised less the discount cash offer) divided by the (discount rate for the average number of years for collection). So, this means, Universities offering the BIGGEST DISCOUNTS will get the most students, so for these FACTORY MODEL STACK EM HIGH universities, the decision will simply be based on a commoditised price (elastic demand curve). For other world-class brand named institutions, no discounts need be provided, and in fact, they could charge a lot more because of their perceived inelastic demand. This means we still have at least a two-tier or three-tier university educational system. The widest spectrum is de facto, from institutions gaining little or no return (high discount providers) to premium brands ("I paid a million bucks for my Patek Philippe degree and it doesn't talk back.") Permit me to give you an example from the unregulated postgraduate degree market.
3. London Business School holds the world's top ranking for its MBA and its Masters in Finance courses. Guess how many applications it receives each year for 2,000 places. About 250,000! If it could sell its database of rejections it could probably make £15 million per year. That's approximately the same gross amount that my University's business school makes for all its undergrad programmes. And these two Universities are only a 5 minute walk from each other.
4. Coming back to Aristotle. Is the tuition fee rise a good thing? In terms of promise-keeping, no. The broken promises of Nick Clegg Liberals to not raise tuition fees make them laughing stock liars and totally untrustworthy. Imagine Nick Clegg saying something like, "I promise NOT to bomb Syria," -- there'd be a war in 24 minutes.
5. How about under commutative justice? I'd argue that the tuition raise does nothing for geometric or arithmetic justice, and if anything makes injustice worse on both counts. For geometric or social level of distribution, students coming from lower income or deprived backgrounds will perceive a relatively higher risk in paying for an education, and therefore, are more likely to not participate, while students from relatively higher income brackets will feel no difference since their rich mums and dads will pay for their way anyway. So, on the geometric measure of justice, the tuition rise fails. With regard to the arithmetic, there is a close argument that the student will now be more discriminating, and therefore, move towards courses which offer the value which the student desires. But again, for a relatively poor student, he or she may still be priced out of the market and therefore, be unable to practically participate in "arithmetical justice."
6. Finally, how about liberality? How about it? Well, frankly, no. No freebies to University students.
7. There you have it. Under all three Aristotelian-Aquinian criteria for adjudging the moral goodness of the tuition fee hike rule, the rule takes a hike.
Wednesday 17 August 2011
n-Financial Theology: Which is better from a philosophical perspective, Islamic finance or conventional finance?
1. I know this is a riduculous question, vague and on its face, full of false dichotomies. Nevertheless, there is something straightforward that I have in mind which (1) illustrates the use of category theory as a mode for understanding general concepts in law and finance and (2) to comment and critique what appears to be the morally vacuous and easily reprehensible space of financial derivatives contracts. I will skip (1) for an another day and delve into (2).
2. In brief, my argument, borrowing from James Gorley's (1991) The Philosophical Origins of Modern Contract Doctrine, is that the moral tethers to the Aristotelian-cum-Aquinaian philosophical conceptions that contract law had built from the 13th (Aquinas proper) to the 16th and 17th centuries (the Spanish school) were loosened by the Enlightenment and finally, severed by 18th and 19th century northern European theorists, leaving the corpus of what we know as common law rules of contract (the doctrinal black letter laws)-- offer and acceptance, duress, consent and so on--de-linked from any fundamental moral conception of the Good (as per Aristotle-Aquinas)--and consequently, throughout the second half of the 20th century this 'moral vacuum' in the justification of contracts has been filled by quack-economic theories which demonstrably do not work in the real world and moreover, the morally-de-linked financial contracts per se have contributed significantly to the abuses of chrematistics that Aristotle warned us of in his Politics 2,400 years ago.
3. It would take me a couple thousand words to unpack the paragraph above, but for this blog, let's just assume I could persuade you that this argument is plausible. How does the title to the blog fit now? Well, one way is to say that in contrast to the morally-empty chrematistic financial contracts of Wall St bankers, Islamic finance contracts have not lost their "soul", that is, their philosophical-moral foundations. I can hear a chorus of objections: (1) that financial contracts must be decided on a flexible commercial basis to meet the needs of a dynamic gobal industry and (2) who cares about ancient philosophers anyway--aren't they all dead and Greek, and as we see today, completely untrustworthy? In quick reposte: the argument in (1) is circular and the argument in (2) is ad hominem.
4. The serious point I want to make is that just maybe what Aristotle warned us about chrematistics is reaching a global limit of Tom-foolery. Are rating agencies responsible to tell us the "truth" about the wherewithal of a legal entity to make good its financial obligations? And what does it mean to "rate" a sovereign? Just because we can make leveraged financial instruments, are we to believe we are no longer responsible for their being and becoming in the real world? Ask an investment banker what is the most moral and least moral financial instruments in his arsenal. Absolutely no conception. But ask an Islamic financier the same question, and off he goes, giving you a very nuanced argument based on general moral principles. They may not all come to the same conclusion, but there is a process by which these conclusions are reached. In the secular finance world, where no justification is given except an incremental return, the entire enterprise becomes an empty ritual. In this secular world, where "hedge arbitrage" and "regulatory arbitrage" are accepted as goods-in-themselves, virtues are segregated from action. And like Humpty-Dumpty, we can't put him back together.
2. In brief, my argument, borrowing from James Gorley's (1991) The Philosophical Origins of Modern Contract Doctrine, is that the moral tethers to the Aristotelian-cum-Aquinaian philosophical conceptions that contract law had built from the 13th (Aquinas proper) to the 16th and 17th centuries (the Spanish school) were loosened by the Enlightenment and finally, severed by 18th and 19th century northern European theorists, leaving the corpus of what we know as common law rules of contract (the doctrinal black letter laws)-- offer and acceptance, duress, consent and so on--de-linked from any fundamental moral conception of the Good (as per Aristotle-Aquinas)--and consequently, throughout the second half of the 20th century this 'moral vacuum' in the justification of contracts has been filled by quack-economic theories which demonstrably do not work in the real world and moreover, the morally-de-linked financial contracts per se have contributed significantly to the abuses of chrematistics that Aristotle warned us of in his Politics 2,400 years ago.
3. It would take me a couple thousand words to unpack the paragraph above, but for this blog, let's just assume I could persuade you that this argument is plausible. How does the title to the blog fit now? Well, one way is to say that in contrast to the morally-empty chrematistic financial contracts of Wall St bankers, Islamic finance contracts have not lost their "soul", that is, their philosophical-moral foundations. I can hear a chorus of objections: (1) that financial contracts must be decided on a flexible commercial basis to meet the needs of a dynamic gobal industry and (2) who cares about ancient philosophers anyway--aren't they all dead and Greek, and as we see today, completely untrustworthy? In quick reposte: the argument in (1) is circular and the argument in (2) is ad hominem.
4. The serious point I want to make is that just maybe what Aristotle warned us about chrematistics is reaching a global limit of Tom-foolery. Are rating agencies responsible to tell us the "truth" about the wherewithal of a legal entity to make good its financial obligations? And what does it mean to "rate" a sovereign? Just because we can make leveraged financial instruments, are we to believe we are no longer responsible for their being and becoming in the real world? Ask an investment banker what is the most moral and least moral financial instruments in his arsenal. Absolutely no conception. But ask an Islamic financier the same question, and off he goes, giving you a very nuanced argument based on general moral principles. They may not all come to the same conclusion, but there is a process by which these conclusions are reached. In the secular finance world, where no justification is given except an incremental return, the entire enterprise becomes an empty ritual. In this secular world, where "hedge arbitrage" and "regulatory arbitrage" are accepted as goods-in-themselves, virtues are segregated from action. And like Humpty-Dumpty, we can't put him back together.
Tuesday 16 August 2011
Zenkyoren Lesson: Why We Should Not Make Obviously Bad Decisions
1. Back in the late 1980's while working for Nomura Securities in London, I use to make calls to large institutional clients. One was Zenkyoren. If you've heard about them then you have very specialised knowledge. The manager in charge, Kobayashi-San was always genuinely kind to me, serving me tea and telling me remarkable stories about Zenkyoren. It was the agricultural insurance fund. When I first glanced at its brochure, I told Kobayasi-San that there was a typo. He said, "Where?" "Here, the reported assets have too many ZEROS." He laughed and said, "No, Tanega-san, that's the correct number of zeros." "But Kobayasi-San, that would mean you are the largest fund in the world, by far!" He simply smiled, "Really?" "Yes, I really mean it. HOW IS IT POSSIBLE?"
2. Kobayashi-San then pointed to a picture on the wall. "Tanega-San, please look at this picture. It is our board of directors. Do you notice anything strange?" I looked carefully. I saw a group of about 20 old men and Kobayashi-San standing in the middle with his charming smile. "Just old men," I said. He laughed and said, "Look at the old men's hands. Do you see anything?". I was looking for something IN their hands and saw nothing. "No, I can't see anything, I said. "Look, how LARGE their hands are," he said. And then it hit me. These board members were FARMERS.
3. Kobayshi explained how the farmers in Japan organised themselves, how they saved IMMENSE money to support their retirees, building IMMENSE first class facilities like physical fitness stadiums, spa resorts, and care centres and how this particular fund was meant to preserve their future for at least seven generations--150 years or more. Really?
4. We then spoke about rates of return. I asked, "Kobayshi-San, why are you buying long term assets at what you know will bring you negative return?" To set this in context, this was 1988 and Japanese brokers were stuffing Japanese institutions with crap paper and on any reasonable estimation the the long term funding gap showed that these institutions would be losing or paying 2% per year for the privilege! His answer betrays the "giri" values of the people. "Tanega-San, this is something we must do for everyone." "But Kobayasi-San, you can't do this forever. You will run out of money." "Not for a long time, Tanega-San."
5. Really? Dear Reader, just because governments have printing presses and can roll over their national debts at near-zero interest rates does NOT MEAN that said governments will be able to fool anybody in the markets for any appreciable time. The US and Europe have STRUCTURAL problems that cannot be solved without a re-setting of debts. Expect only fool's rallies until the debts come under control.
2. Kobayashi-San then pointed to a picture on the wall. "Tanega-San, please look at this picture. It is our board of directors. Do you notice anything strange?" I looked carefully. I saw a group of about 20 old men and Kobayashi-San standing in the middle with his charming smile. "Just old men," I said. He laughed and said, "Look at the old men's hands. Do you see anything?". I was looking for something IN their hands and saw nothing. "No, I can't see anything, I said. "Look, how LARGE their hands are," he said. And then it hit me. These board members were FARMERS.
3. Kobayshi explained how the farmers in Japan organised themselves, how they saved IMMENSE money to support their retirees, building IMMENSE first class facilities like physical fitness stadiums, spa resorts, and care centres and how this particular fund was meant to preserve their future for at least seven generations--150 years or more. Really?
4. We then spoke about rates of return. I asked, "Kobayshi-San, why are you buying long term assets at what you know will bring you negative return?" To set this in context, this was 1988 and Japanese brokers were stuffing Japanese institutions with crap paper and on any reasonable estimation the the long term funding gap showed that these institutions would be losing or paying 2% per year for the privilege! His answer betrays the "giri" values of the people. "Tanega-San, this is something we must do for everyone." "But Kobayasi-San, you can't do this forever. You will run out of money." "Not for a long time, Tanega-San."
5. Really? Dear Reader, just because governments have printing presses and can roll over their national debts at near-zero interest rates does NOT MEAN that said governments will be able to fool anybody in the markets for any appreciable time. The US and Europe have STRUCTURAL problems that cannot be solved without a re-setting of debts. Expect only fool's rallies until the debts come under control.
Friday 12 August 2011
n-JOKES: New Proposed Master of Laws Entrance Exam Tests English Comprehension and Humour
1. Major Premise of English Society: It is impossible to understand proper English without a strong sense of irony. For witticisms that bring a smile: see, http://www.ibk-lawyers.com/quotable.php
2. I'm tempted to use these sorts of quotations as new oral entry tests for applicants to my Master of Laws course. Three quotations will be read by the applicant. If the applicant does not laugh or smile upon reading each, the applicant will be denied entry for either a lack of English comprehension or a lack of humour. Examples follow:
3. "Quite apart from the judicial qualities of that learned judge, who was not at all prone to aberration, I am perfectly placed to repel any suggestion that advocacy could conceivably have accounted for that result, since I was leading counsel for the applicant."
Bokhary JA in chambers in The Queen v Oscar Li Ka To, on Cons VP grant of bail pending appeal in R v Tam Chung-sing.
4. "A bank's failure may, by force of rumour and suspicion, undermine other banks, perhaps very rapidly — Fama, malum qua non aliud velocius ullum — but it will not always do so."
Laws LJ in SRM Global Master Fund LP & Ors v The Commissioners of Her Majesty's Treasury (28 July 2009. [OK, this isn't funny but it is on point for the current banking crisis and how rioters in London are spreading their stories.]
5. "I questioned their parentage when they praised my virility..." Denis Healey, when asked if a shouting match on the floor of the Commons involved shouts of "bastards" and "f***er"
Thursday 11 August 2011
n-Financial Wars: Ban Short Selling and Guess What Happens?
1. On Thursday, August 11, 2011, the government authorities of France, Belgium, Itay and Spain announced a short selling ban. See: http://www.ft.com/cms/s/0/9a55839a-c42d-11e0-ad9a-00144feabdc0.html#axzz1UjiDK0Zt
2. Just how smart is that? Zerohedge provides a succinct price comparison to the US short selling ban of Sep 19, 2008:
The short selling ban led to a 48% drop in less than a month.
Source: http://www.zerohedge.com/news/here-what-happened-when-sec-banned-shorting-financial-companies-2008
3. Anyone writing a short thesis on short selling (triple alliteration intended) must read the most Quack-Filled regulatory letter that rivals the pure shoot-myself-in-the-foot regulations of Sarbanes-Oxley and Dodd-Frank, called the "SEC Short Selling Ban" of September 19, 2008. See: http://www.sec.gov/news/press/2008/2008-211.htm
4. An important analysis of this ban that politely demolished the pro-ban arguments was conducted by the US SEC itself (!) (Dec 16, 2008) which stated that "our results ...are inconsistent with the notion that, on a regular basis, episodes of extreme negative returns are the result of short selling." See, http://www.sec.gov/comments/s7-08-09/s70809-369.pdf.
5. The outcome of (3) and (4) above is the SEC Short Sale Circuit Breaker Rule, see: http://www.sec.gov/rules/final/2010/34-61595.pdf, adopted Feb 26, 2010, which at 334 pages is a bargain and unlikely to have been read by anyone.
2. Just how smart is that? Zerohedge provides a succinct price comparison to the US short selling ban of Sep 19, 2008:
The short selling ban led to a 48% drop in less than a month.
Source: http://www.zerohedge.com/news/here-what-happened-when-sec-banned-shorting-financial-companies-2008
3. Anyone writing a short thesis on short selling (triple alliteration intended) must read the most Quack-Filled regulatory letter that rivals the pure shoot-myself-in-the-foot regulations of Sarbanes-Oxley and Dodd-Frank, called the "SEC Short Selling Ban" of September 19, 2008. See: http://www.sec.gov/news/press/2008/2008-211.htm
4. An important analysis of this ban that politely demolished the pro-ban arguments was conducted by the US SEC itself (!) (Dec 16, 2008) which stated that "our results ...are inconsistent with the notion that, on a regular basis, episodes of extreme negative returns are the result of short selling." See, http://www.sec.gov/comments/s7-08-09/s70809-369.pdf.
5. The outcome of (3) and (4) above is the SEC Short Sale Circuit Breaker Rule, see: http://www.sec.gov/rules/final/2010/34-61595.pdf, adopted Feb 26, 2010, which at 334 pages is a bargain and unlikely to have been read by anyone.
Recognising the Subtle of Boom-Bust Cycles -> Kondratiev, Ramachandran & Brunswik
1. Just in case you are wondering whether there is any theory available that might be better than astrology or macro-economics that might be able to help you prepare for the immediate and long term future, then you may want to investigate theories which have the form of PERMUTATION SYMMETRIES. These are theories and models that have a cyclic or ring structure. Think of Oedipus Rex, and the logic of tightly bound fate which causally folds back on itself.
An example of this sort of cyclic theory is Kondratiev. For good summation with links, see: http://en.wikipedia.org/wiki/Kondratiev_wave
Source: http://northcoastinvestmentresearch.wordpress.com/2009/02/02/the-kondratieff-cycle/
2. Whether traders, government regulators and market pundits like it or not, markets are bound by bilateral, translational and rotational symmetries at every discrete level of transaction. That is, from the level of a one to one party exchange, to the level of large movements of funds, goods, intangibles, across borders and recorded on electronic screens. Are markets suffused with these basic symmetries or are we projecting these symmetries onto what are actually random events of the markets? Epistemologically, the limit of pattern recognition is probably fixed at the neuronal level. [See, research on "mirror neurones"--Ramachandran's "A Tell-Tell Brain" (2011) is a good place to start. My 17 year old son is writing a philosophy paper on mirror neurones and the quantum brain hypothesis, and he tells me Ramachandran is quite readable.]
3. Is it possible that those who are able to read the markets well aren't just outliers on a normal distribution, but "wired" with a particular perceptual talent. My investigations in behavioural finance led me to a tragic-hero character named Brunswik of the University of California, Berkeley, who originated pyscho-metric testing for employment back in the 1920's and who created an amazing training model for enhancing pattern-recognition, which is used to this day, for example, to train up radar engineers to make split-second decisions relating to identifying "friend or foe" fighters in hundreds of milliseconds. One of his models which i really admire is called, "Brunswik Lens Symmetry" and is a classic in pedagogical methods. I wrote a rather lame 100 question do-it-yourself-Brunswik-Lens-Symmetry test 5 years ago which I've withheld from publication. Spooky thing is that it is fairly good at predicting the character of potential employees. Anyway, Brunswik was a tragic-hero, however, because he and his wife ended their lives together in a double suicide. His lecturing style was said to be rigorous, incorporating JS Mill, critiquing the Austrian School, and forming testable social algorithms whenever he could. The reason his stuff isn't really out in the open is because of the mathematics he used. Too bad. I believe his stuff really works and could be incorporated in say training stock market operators and machines in recognising certain types of market signals.
Source: http://psycnet.apa.org/index.cfm?fa=buy.optionToBuy&id=2007-10421-008
An example of this sort of cyclic theory is Kondratiev. For good summation with links, see: http://en.wikipedia.org/wiki/Kondratiev_wave
Source: http://northcoastinvestmentresearch.wordpress.com/2009/02/02/the-kondratieff-cycle/
2. Whether traders, government regulators and market pundits like it or not, markets are bound by bilateral, translational and rotational symmetries at every discrete level of transaction. That is, from the level of a one to one party exchange, to the level of large movements of funds, goods, intangibles, across borders and recorded on electronic screens. Are markets suffused with these basic symmetries or are we projecting these symmetries onto what are actually random events of the markets? Epistemologically, the limit of pattern recognition is probably fixed at the neuronal level. [See, research on "mirror neurones"--Ramachandran's "A Tell-Tell Brain" (2011) is a good place to start. My 17 year old son is writing a philosophy paper on mirror neurones and the quantum brain hypothesis, and he tells me Ramachandran is quite readable.]
3. Is it possible that those who are able to read the markets well aren't just outliers on a normal distribution, but "wired" with a particular perceptual talent. My investigations in behavioural finance led me to a tragic-hero character named Brunswik of the University of California, Berkeley, who originated pyscho-metric testing for employment back in the 1920's and who created an amazing training model for enhancing pattern-recognition, which is used to this day, for example, to train up radar engineers to make split-second decisions relating to identifying "friend or foe" fighters in hundreds of milliseconds. One of his models which i really admire is called, "Brunswik Lens Symmetry" and is a classic in pedagogical methods. I wrote a rather lame 100 question do-it-yourself-Brunswik-Lens-Symmetry test 5 years ago which I've withheld from publication. Spooky thing is that it is fairly good at predicting the character of potential employees. Anyway, Brunswik was a tragic-hero, however, because he and his wife ended their lives together in a double suicide. His lecturing style was said to be rigorous, incorporating JS Mill, critiquing the Austrian School, and forming testable social algorithms whenever he could. The reason his stuff isn't really out in the open is because of the mathematics he used. Too bad. I believe his stuff really works and could be incorporated in say training stock market operators and machines in recognising certain types of market signals.
Source: http://psycnet.apa.org/index.cfm?fa=buy.optionToBuy&id=2007-10421-008
Wednesday 10 August 2011
The Physical End of Oil Producing Countries -> Cold Fusion v Abiotic Oil
REVOLUTIONS ARE HAPPENING EVERYWHERE. The old ways are changing. Yesterday, APL eclipsed XOMas the largest market cap company in the USA. Apple computers surpassed Exxon! FINANCE SHOULD NOT BE ABOUT ENSLAVING THE MIND IN FEARS. IT SHOULD BE ABOUT MAKING PHYSICAL LIFE HAPPY AND FUN. DO YOU BELIEVE OIL WILL BE THE ONLY FUEL OF CHOICE FOR GLOBAL CIVILISATION? WHAT IF THE PRICE OF ENERGY WERE TO FALL TO ONE-ONE HUNDREDTH OF ITS CURRENT PRICE?
1. Check this out: "Andrea Rossi is the inventor of the “Method and Apparatus for carrying out Nickel and Hydrogen Exothermal reactions” (known to the general public as E-Cat) for which international patent demand no. WO2009/125444 is pending and Italian Patent office has already been issued on April 6th, 2011 the final patent no. 0001387256."
Source: http://energycatalyzer3.com/news/231
2. Nobody really knows if Rossi has invented a new cold fusion reactor that generates enough heat to become self-sustaining, but if he has then I'd be buying nickel and whatever other special metals he uses in the process big time.
3. If Rossi's e-cat cold fusion works then the price of energy could go down very dramatically, especially, if all the ingredients to his machine are relatively abundant.
4. What would be the consequences of Rossi's invention? It could probably reduce cost of energy, but much would depend on the relative availability of the substances critical to its operation. Whatever is the rarest of substances for its operations, that substance would be the limiting factor for its distribution into the general economy.
5. Now suppose e-Cat technology or some other alternative to oil is found to be viable, then what will happen to the oil producing countries? The answer to this question depends on whether the abiotic origin of oil is true. See: http://oilgeopolitics.net/Geopolitics___Eurasia/Peak_Oil___Russia/peak_oil___russia.html
1. Check this out: "Andrea Rossi is the inventor of the “Method and Apparatus for carrying out Nickel and Hydrogen Exothermal reactions” (known to the general public as E-Cat) for which international patent demand no. WO2009/125444 is pending and Italian Patent office has already been issued on April 6th, 2011 the final patent no. 0001387256."
Source: http://energycatalyzer3.com/news/231
2. Nobody really knows if Rossi has invented a new cold fusion reactor that generates enough heat to become self-sustaining, but if he has then I'd be buying nickel and whatever other special metals he uses in the process big time.
3. If Rossi's e-cat cold fusion works then the price of energy could go down very dramatically, especially, if all the ingredients to his machine are relatively abundant.
4. What would be the consequences of Rossi's invention? It could probably reduce cost of energy, but much would depend on the relative availability of the substances critical to its operation. Whatever is the rarest of substances for its operations, that substance would be the limiting factor for its distribution into the general economy.
5. Now suppose e-Cat technology or some other alternative to oil is found to be viable, then what will happen to the oil producing countries? The answer to this question depends on whether the abiotic origin of oil is true. See: http://oilgeopolitics.net/Geopolitics___Eurasia/Peak_Oil___Russia/peak_oil___russia.html
Tuesday 9 August 2011
Youth Riots and Broke Governments: What Loss of Faith Really Means
1. London has turned into a poor youth mobs cry for attention. Criminality is occurring, yes, but at a "copy-cat" level which means the youths are inspiring themselves to express their identity with other youths who don't belong to the moneyed society. These are the same youths in MENA who rioted in the Arab Spring air and youths in China who are part of the tens of millions vastly underpaid or under employed. These are the 100s of millions of youths throughout the world who've become the tossed salad of FAILED MONEY SYSTEMS. It's sad but the end of this story will be counted in deaths. Pray for rain. When it rains in England, nobody sane or insane can bear to go out. Some youths who had thrown bricks at a flower shop and set it on fire were casually walking away and were asked why they did that. One of them said, "We have no money today." See: http://www.bbc.co.uk/news/uk-england-london-14450248. Cameron et al better show a credible hand or London's chance at having a celebratory Olympics next year will be destroyed by a couple thousand roving gangs--much like Paris is during recent years.
2. After the US government showed its supreme incompetence and idiocy NAKED to the world on August 2, 2011 by enacting a bitterly cobbled up quack slurry called the US Budget Control Act of 2011, the global markets started to tank, and after the biggest credit rating agency of the world, S&P, on August 5th, whose job is to voice an opinion on credit worthiness, re-rated the US long term debt (read here "long term viability in terms of paying its financial obligations"), the global markets started to crash. I am sure the US Fed will step in and announce a programme to save the world sometime this week. Otherwise, the markets will COLLAPSE by another say 50%. However, I am also skeptical that such an announcement by the Fed will do much more than merely slow down, if at all, the decline in the markets. The Fed and the US government have lost their credibility. S&P merely confirmed the obvious--that substantive lies, fraud and deception cannot be covered up with pompous and arrogant "democratic" processes that result in legislation that means exactly the opposite of what it says. Yes, I blame Obama and the Senators and the State and the Congressmen for being crude tricksters, con artists and Ponzi Scheme vendors. Here's why.
3. If the argument is that the US is broke and the US Budget Act of 2011 was suppose to give Obama a reprieve on re-raising the debt ceiling until after the election, Then why does it appear that the US PUBLIC DEBT IS ACTUALLY ACCELERATING IN SIZE as we breathe. See Table below on US Debt Subject to Limit (courtesy of www.zerohedge.com):
Can you believe the US will bump into the debt ceiling again by the end of September? And more of this messy screeching theatre of the President versus Republicans versus Democrats versus Tea Party will go round and round again? Riots will come to DC. Maybe the youths have a point.
2. After the US government showed its supreme incompetence and idiocy NAKED to the world on August 2, 2011 by enacting a bitterly cobbled up quack slurry called the US Budget Control Act of 2011, the global markets started to tank, and after the biggest credit rating agency of the world, S&P, on August 5th, whose job is to voice an opinion on credit worthiness, re-rated the US long term debt (read here "long term viability in terms of paying its financial obligations"), the global markets started to crash. I am sure the US Fed will step in and announce a programme to save the world sometime this week. Otherwise, the markets will COLLAPSE by another say 50%. However, I am also skeptical that such an announcement by the Fed will do much more than merely slow down, if at all, the decline in the markets. The Fed and the US government have lost their credibility. S&P merely confirmed the obvious--that substantive lies, fraud and deception cannot be covered up with pompous and arrogant "democratic" processes that result in legislation that means exactly the opposite of what it says. Yes, I blame Obama and the Senators and the State and the Congressmen for being crude tricksters, con artists and Ponzi Scheme vendors. Here's why.
3. If the argument is that the US is broke and the US Budget Act of 2011 was suppose to give Obama a reprieve on re-raising the debt ceiling until after the election, Then why does it appear that the US PUBLIC DEBT IS ACTUALLY ACCELERATING IN SIZE as we breathe. See Table below on US Debt Subject to Limit (courtesy of www.zerohedge.com):
Can you believe the US will bump into the debt ceiling again by the end of September? And more of this messy screeching theatre of the President versus Republicans versus Democrats versus Tea Party will go round and round again? Riots will come to DC. Maybe the youths have a point.
Monday 8 August 2011
How To Get Rich From Poor and Vice Versa: An Anthropological and Financial Theological Summation
1. I've been observing, sometimes as a "participant observer", the ways of the financial markets since July 1987. At one point, I was in charge of an arbitrage hedge fund of about $1bn when $1bn was considered a lot of money and even before we labelled such funds as "Hedge Funds." They were "based on" models that supposedly took advantage of "mispricings" in several simultaneously trading markets. However, there was always a catch. We would always have some form of what I call "execution risk" or "human judgement risk" and I always wondered why have all these humans in the way since once you've made the calculation, it was all a matter of hitting the bid or offer. Those were comparative halcyon days when we think of the ALGOs that make this "price discovery" process simply a machine-to-machine communication interface where trades are executed at 100,000 orders per second. Different world where human judgment in execution appears to have disappeared. Or, has it?
2. There's a biblical story of the three sons who were given a bit of money by their father and after one year, each reported back. One spent it all, another saved and the third invested. This story has bothered me because if we think crudely of all the wealthy people on the planet, why aren't they sharing their wealth with the poor? I know all the economic arguments pro and con, but there is still something missing in the theories that doesn't get into the "genetics" of the problem.
3. Here's one insight to the problem of wealth distribution. Think of the least amount of money in any given society--that is, the smallest increment of valued for exchange--and ask yourself, "If I "borrow" this penny from this Person X, what will this Person X expect in return?" This may appear to be a question for which no objective answer is possible, but fantastically, there is an answer specifically set out by Marcel Mauss in his classic, The Gift. In modern terms, we call it leverage.
4. In the biblical story, the three sons have completely different views on leverage. The one who lost everything had a view of leverage that was too high. The one who merely saved, too low. And the one who invested, had the correct view in terms of turning an illiquid asset into working positive net cash flow.
5. You might wonder why am I drawing references from homey biblical stories and anthropological literature, and not citing financial economic or law and finance articles. Why? Because that academic literature is not going to give you insight in how you can deal personally with your money. Now that you know it's all about the leverage, you can easily deal with rich and poor. You can even CHOOSE to be rich or poor. It's a matter of understanding your own sense of leverage.
2. There's a biblical story of the three sons who were given a bit of money by their father and after one year, each reported back. One spent it all, another saved and the third invested. This story has bothered me because if we think crudely of all the wealthy people on the planet, why aren't they sharing their wealth with the poor? I know all the economic arguments pro and con, but there is still something missing in the theories that doesn't get into the "genetics" of the problem.
3. Here's one insight to the problem of wealth distribution. Think of the least amount of money in any given society--that is, the smallest increment of valued for exchange--and ask yourself, "If I "borrow" this penny from this Person X, what will this Person X expect in return?" This may appear to be a question for which no objective answer is possible, but fantastically, there is an answer specifically set out by Marcel Mauss in his classic, The Gift. In modern terms, we call it leverage.
4. In the biblical story, the three sons have completely different views on leverage. The one who lost everything had a view of leverage that was too high. The one who merely saved, too low. And the one who invested, had the correct view in terms of turning an illiquid asset into working positive net cash flow.
5. You might wonder why am I drawing references from homey biblical stories and anthropological literature, and not citing financial economic or law and finance articles. Why? Because that academic literature is not going to give you insight in how you can deal personally with your money. Now that you know it's all about the leverage, you can easily deal with rich and poor. You can even CHOOSE to be rich or poor. It's a matter of understanding your own sense of leverage.
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