Posts filed under “Mathematics”

Overstating Bailout Costs

“The total potential federal government support could reach up to $23.7 trillion.”
-Neil Barofsky

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Yesterday, we noted that the 23 Trillion dollar bailout was a “WTF number.”

The statement above really turns on your definition of the word “Support” — this is not the actual costs, but more of a measure of the total guarantees, loans, indemnifications and credit extended in all of the bailouts.

Floyd Norris takes it apart — in detail — and reveals more hyberbole than actual expense, noting that number given in Congressional testimony “was vastly overblown.”

Key factors to getting to 23 trillion:

• It includes estimates of the maximum cost of programs that have already been canceled or that never got under way.

• It assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless.

• It assumes that every bank in America fails, with not a single asset worth even a penny.

• And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

• It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.

• Every dollar invested by the government in banks would have to become worthless

• The banks would have to default on securities guaranteed by the F.D.I.C.

• All the collateral posted by the banks to get loans from the Fed would also have to become worthless.

Bottom line: In reality, we are unlikely to get anywhere near that number . . .

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Source:
Big Estimate, Worth Little, on Bailout
FLOYD NORRIS
NYT, July 20, 2009

http://www.nytimes.com/2009/07/21/business/economy/21bailout.html

Category: Bailouts, Mathematics

750 Million Albums is an Off The Wall Number

No, Michael Jackson did not sell 750 million albums. A funny thing happened to Michael Jackson’s sales figures over the past few years: They seemed to have more than tripled: “In the last three years of his life, long after the release of his final original album, Michael Jackson’s career album sales took a curious…Read More

Category: Mathematics, Music

SEC’s Shapiro: Ratings Agencies Need Supervision

Encouraging comments from SEC chair Mary Schapiro: “The Securities and Exchange Commission has created a new group of examiners to oversee credit rating agencies, which came under sharp criticism for their role during the financial crisis. The SEC has already adopted a number of measures to increase transparency at credit rating agencies, which are paid…Read More

Category: Bailouts, Earnings, Mathematics

Why Should You Care If Economists Raise U.S. Outlook ?

Look, let’s not beat around the bush: Wall Street economists, as a group, well, they suck. Most of them did not see the crisis coming; many were deep in denial about the recession long after it started. They missed the housing boom and bust, the credit crisis. They continued to see phantom bottoms and false…Read More

Category: Economy, Mathematics, Psychology

Bill Miller is Back? Hardly.

There has been a lot of recent chatter along the lines of Bill Miller is back in the WSJ, Investor’s Business Daily, Bloomberg, etc. This turns out to be a simple case of bad mathematical analysis — like declaring Fannie Mae (FNM), AIG or Citibank (C) buy & hold owners were back because they were…Read More

Category: Investing, Mathematics

Deeply Oversold Bounce, Not Green Shoots

Michael (Jeff Goldblum): I don’t know anyone who could get through the day without two or three juicy rationalizations. They’re more important than sex. Sam (Tom Berenger): Ah, come on. Nothing’s more important than sex. Michael: Oh yeah? Ever gone a week without a rationalization? -The Big Chill > You can never underestimate the absurdity…Read More

Category: Employment, Mathematics, Psychology

Black Swan: We’re in the Middle of a Crash

Category: Bailouts, Mathematics, Video

Gödel, Escher, Bach: A Mental Space Odyssey

In college, I was pretty blown away by this book. So when I stumbled across the MIT openware course on Douglas Hofstadter’s Pulitzer Prize winner, Godel, Escher, Bach: An Eternal Golden Braid, I just had to share it: Here’s the MIT course description: What do one mathematician, one artist, and one musician all have in…Read More

Category: Mathematics

Good/Surprising/Stunning Housing News

The good news is that Housing Starts and Building Permits each increased for the month of May. And in a statistical shocker, the monthly gains for May 2009 were (surprisingly) greater than the margin of error for both Starts at 17.2% (±14.4%) and Permits at 4.0% (±1.7%) over April. The stunning news was the 45.2%…Read More

Category: Mathematics, Real Estate

How Trillion-Dollar Deficits Were Created

Today’s must read article is a front page NYT story by David Leonhardt. It looks at the process by which boom time surpluses were turned into boom time deficits, and then even greater crash deficits. The two economic takeaways from the piece fits into some of the nonsense I have been criticizing here: 1) President…Read More

Category: Bailouts, Credit, Economy, Mathematics, Politics