Some interesting papers have come out on the “Credit Crunch”.

• Leveraged Losses: Lessons from the Mortgage Market Meltdown

  This paper provides a good overview of the financial market turmoil occurring since August 2007, and discusses how the crisis might impact other areas of the economy.

• A Black Swan in the Money Market
  

  This paper examines the sudden jump in spreads between the overnight and term inter-bank interest rates.

Here is a great talk by Harvard Professor Elizabeth Warren on the upcoming collapse of the middle class. The first 5 minutes are spent on introducing Professor Warren, so I recommend skipping to roughly 5-6 minutes into the video. She gives a very, very interesting comparison of the changing socio-economic factors between 1970-2007. The talk was given on the 8th March, 2007 at Berkeley.

Here are some more financial blogs that seem good:

• The Aleph Blog - Investment strategies and advice (seems pretty US-centric)
• The Epicurean Deal Maker - Sarchastic, sardonic and humerous insight into Wall Street
• Going Private - The Sardonic Memoirs of a Private Equity Professional - This is an absolutely hilarious blog about the world of Private Equity. Excellent!
• A Fist-full of Euros - An interesting blog focusing on European finance/economics/politics.

There’s a great interview in Reason Magazine with economist Lant Pritchett about how stopping immigration is effectively holding countries’ citizens hostage. He argues that constraining people within artificial borders bounding countries which are economically unviable is one of the biggest sources of global inequity. Very interesting read.

This past week has been facinating in the financial markets. After a long slide downwards, the markets tumbled at the beginning of the week, and now they are bouncing back upwards.
Initially the market dive looked like it was triggered by worries over the problems with the Monoline Insurers.
The Fed responded by cutting interest rates by 75 basis points on Wednesday. This seemed to have little effect with various indices falling even further. It did however seem to have a dramatic effect on the probability that the US will go into recession.
On Thursday we found out that Societe Generale lost $7 Bln from trader fraud (leading the market wags to dub it “Shock Gen”. This seemed to have little negative impact on the markets with the indices all shooting upwards. They are all up today, albeit not as much as yesterday. It looks like the momentum is leaving the bounce.

So could the massive falls be attributed to Soc Gen selling out of their positions and realizing their losses? Can some of the market euphoria be attributed to proposed monoline bail-out?

I guess we’ll see how next week develops!

Here are some financial blogs I like:

• Robert Peston at the BBC
• AlphaVille from the FT
• Calculated Risk
• Econbrowser

I’m getting more and more information from blogs and forums these days, so I want to try and get as many diverse and informative sources as I can.

The Redshift theory basically categorizes computing needs as either growing faster or slower than Moore’s Law. Traditional business is over-served by Moore’s Law, whereas applications such as financial market simulations, drug industry research, computer animation, and the high-growth end of the internet industry (Facebook, You-Tube, Flickr), are needing computing resources faster than Moore’s Law. These industries are apparently the ones going to generate above-GDP levels of return to an investor.

This theory was advanced by Greg Papadopoulos of Sun Microsystems. One of Sun’s solutions for servicing the computing needs of “Redshifting” companies is Project Blackbox - providing as much computing power as possible inside a shipping container.

Historian Scott Trask of the Mises Institute has published a great article on 10 economic falacies that have permeated their way through public thinking. Myth #1 was the broken window, which is basically the idea that a disaster has a positive effect on the economy. He also discusses the myth that war is a boon on the economy. The basic idea behind the myth is that a disaster like an oil spill gets double-counted when calculating GDP, because there is the initial outlay in the oil and also the cost of cleaning it up.