i hope they know something that i do not klnow, becouse if they don't then the country is in for a long hard time. whoever wins the election is not going to matter except that the "winner" will have the blame. if obama wins and we are hit with a depression, the for decades to come then he and the dems will be associated with depression and if McCain wins it goes the other way. 

i just hope that taxes are not raised ala herbert hoover. it will make it worse faster.  


--- On Tue, 10/7/08, KE Cleveland <[log in to unmask]> wrote:

> From: KE Cleveland <[log in to unmask]>
> Subject: How statistics were used to kill the banking system
> To: [log in to unmask]
> Date: Tuesday, October 7, 2008, 2:59 PM
> Hey all, I'm back home, safe--and eating home-cooked
> meals again.  Yum!
> 
> I've been following the political winds on C-PALSY and
> watching the news
> catch-as-catch-can.  Ken, I agree with you that much of the
> mess we find
> ourselves in has much to do with the greed of speculative
> banks that lured
> people into buying homes they really could not afford.  I
> think that they
> knew--or thought they knew, statistically, that a certain
> percentage of
> borrowers would not be able to pay their mortgages as rates
> rose, but they
> lowballed the figures when they viewed the stats as they
> wished to see
> them.  Here is an interesting essay by Nassim Nicholas
> Taleb who posits that
> the banks,and the Fed, viewed probability through
> rose-colored glasses:
> 
> http://www.edge.org/3rd_culture/taleb08/taleb08_index.html
> 
> A big part of my job at the County is looking at
> "risk" (terrorism, flood,
> famine, etc.) and matching it against "impact"
> (no one gets hurt, many get
> hurt, everyone's dead, etc.) and coming up with an
> analysis (Risk Impact
> Analysis).  Generally, events that are low risk, meaning
> they have a low
> probability of occurring, have greater impact than events
> that are high risk
> (high probability).  If we wish to minimize risk, then we
> concentrate on
> things that are higher up on the risk scale.  For example,
> it's a pretty
> high risk (high probability) that someone would bring a
> weapon into a
> courtroom to settle a dispute, avenge a death, etc.  The
> impact, though,
> would be (statistically) fairly low as the offender would
> likely be subdued
> or killed before hurting more than one or two people in the
> courtroom.  We
> want to minimize risk, though, so we put metal detectors at
> every outside
> entrance and at the entrance to the courtrooms.
> 
> Now the risk of a nuclear suitcase bomb being exploded
> inside the courthouse
> is, statistically, quite low.  The impact of such an event
> would be quite
> high (everyone's dead).  Because we "manage for
> risk", though, we don't put
> too much time or money into "hardening" our
> environment.  If we did, that
> would be "managing for impact" and leave
> ourselves open to those events that
> are much more likely to occur.
> 
> It appears that the banks managed for impact, or for those
> low-probablility
> events, and allowed themselves to be more open to risk. 
> The impact is that
> they would make oodles of money from the up-tick in
> adjustable-rate
> mortgages and figured the risk of loan defaults to be
> statistically
> manageable.  They figured wrong.
> 
> The $700B grew to $800B as money for pet projects was added
> to the bill.
> It's just like going into a car dealership and picking
> out a car you can't
> afford to begin with, and then you upgrade to leather seats
> and a bigger
> engine.
> 
> Where is the $700B going to come from?  Well, the Treasury
> simply doesn't
> have that kind of money.  So what are they going to do? 
> They are going to
> print it.  Simple as that.  The idea is to
> "infuse" the system with dollars
> to make banks more comfortable with the idea of lending
> even more money--to
> me, you and each other. The trouble in this scenario is
> that Risk and Impact
> are both high.  The risk is that inflation will get out of
> hand, and the
> impact of higher prices in a receding economy is, well,
> depression.
> 
> So why was Congress, both House and Senate, Republican and
> Democrat, so
> eager to push this bill when the vast majority of the
> electorate said,
> "No!"?  I have no idea--unless Congress knows
> something we don't.
> 
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