Fragility is the quality of things that are vulnerable to volatility. Take the coffee cup on your desk: It wants peace and quiet because it incurs more harm than benefit from random events. The opposite of fragile, therefore, isn’t robust or sturdy or resilient—things with these qualities are simply difficult to break.
Category: Macro
Getting to Normal
The de facto default by Greece early this year ended investors’ complacency. The government bonds of peripheral eurozone countries thus became toxic. Given the unprecedented nature of the Greek default, the market valuation of peripheral debt has been fluctuating widely, still searching for “fundamentals,” such as deficit or debt levels, that could explain the evolution of risk premia over time.
What if the Global Financial Crisis is Permanent
In a week where prominent fund manager Bill Gross likened America’s credit-based economic model to a crystal meth addiction (like any ‘hopium’ or narcotic, debt borrows the benefits of tomorrow for the enjoyment of today) and when central banks, from Australia to Russia, are joining peers in Europe, Britain, the US and Japan in pushing down rates or pump-priming markets with liquidity, one can see another of Mill’s classic warnings – the tyranny of the majority – coming true, with quick fixes and short-term solutions the order of the day.
Subprime Auto Nation
It’s amazing how many cars you can sell when you aren’t worried about getting paid. This is the beauty of a fiat currency, a printing press, and a taxpayer available to pick up the tab after the drunken party gets out of hand.
Abnormal Capitalist 