>>> [EMAIL PROTECTED] 08/22/01 04:17PM >>> > > > >>> [EMAIL PROTECTED] 08/22/01 02:12PM >>> > > > (((((((((( > > > > CB: Since it was bailed out when it lost its bet, LTCM was taking > zero risk. It was the opposite of a high risk taker , yet it is > "rewarded" the most of all because it claims to take risk. > > > > ((((((( > ======= > Ex ante it took the risk. Ex post, the risk was diffused. > > ((((((((( > > CB: If ex post it didn't take the risk, then it didn't take the risk. The ex ante risk was an illusion. ======= No. That's too teleological and smacks of post hoc ergo prompter hoc (((((((( CB: The philosophical , Latininzed concepts you are using are not valid in analyzing this. If , in fact, LTCM was not allowed to take the fall when its bet failed , then it did not take a risk initially. Risk means that a chance is taken of a negative outcome. If when the negative outcome arises, the "risktaker" is not required to suffer the negative outcome, then , in fact, there was no risk taken in the first place. There is nothing teleological about that, unless you mean that LTCM's winning was predetermined. Yes, LTCM's win was predetermined. The Fed just didn't tell anybody ahead of time. Nor is there any element of "this occurred after that so it occurred because of that " That is just either you joking or a misuse of reference to that fallacy. I am not saying that the bailout occurred after the risk taking, and therefore the bailout occurred because of the risk taking. You must be joking. The bailout occurred so that LTCM's owners would remain rich. The bailout occurred BECAUSE the richest people have enough power to guarantee they stay rich. The side effect is that LTCM's owners never took a risk in the first place, because they were insured against the risk by the U.S. central bank authority. The fact that the "insurance" was not announced until after the failure doesn't matter in evaluating whether the risk was real or illusory. This can be generalized. The bourgeoisie claim that they are rich because they take lots of risks. They mythologize that they seek risks. This is a big lie. They seek sure things and leave the risktaking to the suckers whom they fleece. They do everything they can to take all the risk out of their investments. P.T. Barnum was a bourgeois poet when he said "A sucker is born everyday." (((((((( We have to struggle to see ex ante and ex post as an ongoing time asymmetric dynamical system. Risk is a dynamical process. You're trying to "freeze" the dynamics. It's akin to, but not identical with, John Wheeler's delayed choice experiments in quantum theory. That we have some but not total, leeway in configuring the accounts of the past is not the same as saying the future is already "out there" and thus risk is an "illusion." ((((((((( CB: This does not take as much struggle to understand as you claim. Risk, in this case, would mean that LTCM's owners put up some money with some chance that they would lose it if certain events occur. If when those events occur, someone intervenes and prevents LTCM's owners from losing the money, then the risk was illusory in the first place. The money was not at risk really. A no lose situation is not a risk. QED (((((((( Imagine the debt is repudiated. How far back in time would the IMF need to go to rewrite/clear the books? I would venture to guess to the very beginning of it's existence. We're talking about the erasure of information from an ongoing computational process. The larger question is why the credit/debt binary even exists for us. Look at those passages where M. is saying we need to get beyond money itself in order to be fully human. "But the mere trading of risks, *taken as a given*, is only part of the story, and in many respects the less interesting part. The possibility of shifting risks, of insurance in the broadest sense, permits individuals to engage in risky activities which they would not other wise undertake. I may well hesitate to erect a building out of my own resources if I have to stand the risk of its burning down; but I would build if the building can be insured against fire. The shifting of risks through the stock market permits an adventurous industrialist to engage in productive activities, even though he is individually unable to bear the accompanying risks of failure. Of course under these circumstances, some projects will be undertaken which will turn out to be mistakes; that is what is meant by risk. But at any moment society is faced with a set of possible new projects which are on the average profitable, though one cannot know for sure which particular projects will succeed and which will fail. If risks cannot be shifted, then very possibly none of the projects will be undertaken; if they can be, then each individual investor, by diversification, can be fairly sure of a positive outcome, and society will be better off by the increased production." [Kenneth Arrow] Hence the 2nd rule when capital and credit markets "miscompute" time: Panic first--Robin Hahnel. Ian
