Comments on: French Model of Economy Allows Meddling from the State http://www.dailyreckoning.com.au/french-model-of-economy-allows-meddling-from-the-state/2009/06/03/ An independent perspective on the Australian and global investment markets Sat, 21 Nov 2009 17:27:32 -0600 http://wordpress.org/?v=2.8 hourly 1 By: Biker Pete http://www.dailyreckoning.com.au/french-model-of-economy-allows-meddling-from-the-state/2009/06/03/comment-page-1/#comment-82442 Biker Pete Thu, 04 Jun 2009 04:56:09 +0000 http://www.dailyreckoning.com.au/?p=6184#comment-82442 Greg, thanks for that reference. Certainly helped put the whole thing in perspective. I knew nothing of the Keen/Robertson bet, but enjoyed reading about it... . I appreciated this particular point made by Pascoe: "Indeed, the rivers of gold flowing from residential mortgages to the banks is one of the key ingredients in our financial system's present stability." I also noted his comments on unemployment. Behind the most current of our building projects, a young family whose second earner has just lost her job up north, has just commenced building. They appear to not have a worry in the world. As Pascoe suggests, many Australians have built up significant cash reserves. As the wife commented "Rents here are high and we're ahead building." That remains our perspective, too... . Greg, thanks for that reference. Certainly helped put the whole thing in perspective. I knew nothing of the Keen/Robertson bet, but enjoyed reading about it... . I appreciated this particular point made by Pascoe: "Indeed, the rivers of gold flowing from residential mortgages to the banks is one of the key ingredients in our financial system's present stability." I also noted his comments on unemployment.

Behind the most current of our building projects, a young family whose second earner has just lost her job up north, has just commenced building. They appear to not have a worry in the world. As Pascoe suggests, many Australians have built up significant cash reserves. As the wife commented "Rents here are high and we're ahead building." That remains our perspective, too... .

]]> By: Greg Atkinson http://www.dailyreckoning.com.au/french-model-of-economy-allows-meddling-from-the-state/2009/06/03/comment-page-1/#comment-82415 Greg Atkinson Thu, 04 Jun 2009 03:08:57 +0000 http://www.dailyreckoning.com.au/?p=6184#comment-82415 Dan..when are economic models and predictions not in the "fog of war"? :) I mean economists with their models get forecasts so wrong so often that perhaps they should put the models away for a while? Let's face it, if models actually worked with any reliability the world's richest people list would be stacked full of model using economists. I agree with you regarding predictions about the housing market, but this goes for everything from stocks to gold. Sometimes we just have to accept that we cannot see into the future, the best we can do is make some well thought out assumptions and be ready to be wrong. Sad but true. Dan..when are economic models and predictions not in the "fog of war"? :) I mean economists with their models get forecasts so wrong so often that perhaps they should put the models away for a while? Let's face it, if models actually worked with any reliability the world's richest people list would be stacked full of model using economists.

I agree with you regarding predictions about the housing market, but this goes for everything from stocks to gold. Sometimes we just have to accept that we cannot see into the future, the best we can do is make some well thought out assumptions and be ready to be wrong. Sad but true.

]]> By: Dan http://www.dailyreckoning.com.au/french-model-of-economy-allows-meddling-from-the-state/2009/06/03/comment-page-1/#comment-82409 Dan Thu, 04 Jun 2009 02:44:08 +0000 http://www.dailyreckoning.com.au/?p=6184#comment-82409 Greg: To quote Mr. Pascoe's article regarding economic modelling "To provide some context, assuming a normal distribution, a 7.26-sigma daily loss would be expected to occur once every 13.7 billion or so years." .. what he's saying (to save time) is that the economic model used by Goldman Sachs in 2007 was wrong. But why was it wrong? It was probably a better model than my wet-finger-in-the-air approach. In other areas of statistical analysis, if you get a one in a 13.7 billion event, you have to assume the system is not natural - that it's not a normal distribution, and that you've missed something: confounding, bias... something fundamental. And if a patient dies immediately after you give them a sugar coated placebo in a study, it's not an accident, it's a crime scene. The reason economic models don't work is because the system is corrupted and the corrupt individuals in it know what the models predict and how to twist the knife in the trusting investors when they sabotage the economy in various ways. So Mr. Pascoe is right to doubt economic models, but it's not because they fail to predict nature; it's because we are not talking about nature. Sure, a trillion people will on average behave in a certain way, but a few dozen have too much power and their activity cannot be predicted by ordinary means. Hence I think we have to be wary of housing market predictions in this environment, where, economically, it is now the fog of war. Greg: To quote Mr. Pascoe's article regarding economic modelling "To provide some context, assuming a normal distribution, a 7.26-sigma daily loss would be expected to occur once every 13.7 billion or so years." .. what he's saying (to save time) is that the economic model used by Goldman Sachs in 2007 was wrong. But why was it wrong? It was probably a better model than my wet-finger-in-the-air approach. In other areas of statistical analysis, if you get a one in a 13.7 billion event, you have to assume the system is not natural - that it's not a normal distribution, and that you've missed something: confounding, bias... something fundamental. And if a patient dies immediately after you give them a sugar coated placebo in a study, it's not an accident, it's a crime scene.

The reason economic models don't work is because the system is corrupted and the corrupt individuals in it know what the models predict and how to twist the knife in the trusting investors when they sabotage the economy in various ways. So Mr. Pascoe is right to doubt economic models, but it's not because they fail to predict nature; it's because we are not talking about nature. Sure, a trillion people will on average behave in a certain way, but a few dozen have too much power and their activity cannot be predicted by ordinary means. Hence I think we have to be wary of housing market predictions in this environment, where, economically, it is now the fog of war.

]]> By: Greg Atkinson http://www.dailyreckoning.com.au/french-model-of-economy-allows-meddling-from-the-state/2009/06/03/comment-page-1/#comment-82399 Greg Atkinson Thu, 04 Jun 2009 02:07:54 +0000 http://www.dailyreckoning.com.au/?p=6184#comment-82399 Biker Pete: I think Michael Pascoe also wrote a very good article about Australian property prices yesterday on the SMH website. See: http://business.smh.com.au/business/house-prices-not-tipped-to-slide-20090603-bv6p.html Biker Pete: I think Michael Pascoe also wrote a very good article about Australian property prices yesterday on the SMH website. See: http://business.smh.com.au/business/house-prices-not-tipped-to-slide-20090603-bv6p.html

]]> By: Biker Pete http://www.dailyreckoning.com.au/french-model-of-economy-allows-meddling-from-the-state/2009/06/03/comment-page-1/#comment-82373 Biker Pete Thu, 04 Jun 2009 00:13:42 +0000 http://www.dailyreckoning.com.au/?p=6184#comment-82373 In the past, the rich have certainly been more articulate in their lobbying than the poor! As the number of those suffering economic hardship increases, that may change. Not suggesting anything in the order of eighteenth century France, but Obama's election might indicate a great deal more than evolution... . On the question of the overseas property market, which Bill queries, above, this morning's (US) Daily Reckoning includes a very detailed and perceptive property analysis which helps explain why you can't really compare the Australian property market to those in Europe and the US. Doug Hornig's historical recount even goes so far as to timeline a 'second crash' for US housing within twelve months. Nothing really new there, other than the simplicity with which it's all explained. Apart from the probable demise of the FHB scheme and possible rising unemployment here, property seems a far less risky business. Very weak US and UK property foundations make ours look quite substantial. Kinda hope Bill might be right. I've always fancied an apartment on the canal adjacent the Marne! :) In the past, the rich have certainly been more articulate in their lobbying than the poor! As the number of those suffering economic hardship increases, that may change. Not suggesting anything in the order of eighteenth century France, but Obama's election might indicate a great deal more than evolution... .

On the question of the overseas property market, which Bill queries, above, this morning's (US) Daily Reckoning includes a very detailed and perceptive property analysis which helps explain why you can't really compare the Australian property market to those in Europe and the US. Doug Hornig's historical recount even goes so far as to timeline a 'second crash' for US housing within twelve months. Nothing really new there, other than the simplicity with which it's all explained. Apart from the probable demise of the FHB scheme and possible rising unemployment here, property seems a far less risky business. Very weak US and UK property foundations make ours look quite substantial.
Kinda hope Bill might be right. I've always fancied an apartment on the canal adjacent the Marne! :)

]]> By: mike http://www.dailyreckoning.com.au/french-model-of-economy-allows-meddling-from-the-state/2009/06/03/comment-page-1/#comment-82261 mike Wed, 03 Jun 2009 16:20:10 +0000 http://www.dailyreckoning.com.au/?p=6184#comment-82261 ...the wealthy pool together in schools of self-interest, then they cultivate politicians in the manner of race horses which they run in elections, winner take all...they do this to help maintain their health and to keep the crowds amused...it should be mordantly supposed as less than possible for an unbacked horse to even enter the race...although...it is rumoured that obama sarkozy merkel brown harper rudd key...and a kitchen sink did just THAT.... ...the wealthy pool together in schools of self-interest, then they cultivate politicians in the manner of race horses which they run in elections, winner take all...they do this to help maintain their health and to keep the crowds amused...it should be mordantly supposed as less than possible for an unbacked horse to even enter the race...although...it is rumoured that obama sarkozy merkel brown harper rudd key...and a kitchen sink did just THAT....

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