Ratings Agencies – Grade F

27 02 2010

Category: Finance

In my post about some of the financial jiggery-pokery that got the economy where it is I mentioned the problems involved in getting accurate valuations by the ratings agencies. This was well illustrated by the Economist recently with a table of information compiled by Donald Mackenzie of the University of Edinburgh:

With mortgage-backed securities it’s clear the ratings agencies simply got it wrong; dead wrong. They were supposed to be assessing risk, they didn’t do a particularly good job of it… Read the rest of this entry »


Chickenomics 2 – From the Henhouse to Government Debt

1 12 2009

Category: Finance

In my post ‘Chickenomics’ I gave a farmyard illustration of the forces at work with the credit boom. In my example I started out looking to finance a new chicken coop and ended up getting so much money I was looking for a private jet. This is how that process was mirrored in the real economy… Read the rest of this entry »

Chickenomics 1 – From Henhouse to Private Jet

22 11 2009

Category: Finance

For a little while – really a very little while – I accidentally found myself in the heart of the credit-boom. I got a job with the world’s leading law firm working on their hottest area, securitisation, in their boom market, Italy.

I was getting good money and was in an area with great prospects but I felt like I was in the madhouse so I quit to cycle around Milan and eat ice-cream for a while.

When I first started learning about securitisation I could see exactly why everyone got so excited about it and why it’s not going away anytime soon.

It’s alchemy. It really is; it realises value that didn’t previously exist. To try and convey how it works, and a few of the other credit boom phenomena I’ve tried to explain it using a farmyard tale. I’ll explain how the story relates to the real world in later posts. I’m not sure if this chicken parable is at all helpful but here it is… Read the rest of this entry »

Who benefits and who suffers

11 11 2009

Category: Politics, Finance

“But the ones who suffer aren’t the ones who benefited”

That’s George Soros to the Chairman of  the Federal Reserve Alan Greenspan who had dismissed the impact of economic downturns (quoted in David Hare’s play ‘The Power of Yes’).

There’s no better metaphor for that, and the whole of the credit boom, than… Read the rest of this entry »