>>> [EMAIL PROTECTED] 08/23/01 01:13PM >>> > > 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. ========== Unless you have a document or other smoking gun that has LTCM saying "well if we fuck up AG will save us" the above is meaningless. ((((((((( CB: No, that's to positivistic. We make inferences because we won't have direct , sensual experience of all of capitalist reality. We have to use circumstantial evidence. AG and the finance caps. have connections and discussions we will not know about. Well, at least I won't know about. Maybe you have connections. I don't know. Anyway, we don't operate on the smoking gun evidentiary standard on this. It's structural like with saving Chrysler. If you are big enough , you are too big to fail. This might even be a definition of a monopoly/oligopoly. ((((((( LTCM made no money, others poneyed up cash because they were thinking of systemic risk not LTCM's risk. Bankers panic precisely because they're not omniscient, so to say that hindsight is 20-20 and then impute omniscience because of that, is fallacious. (((((((( CB: Nothing in what I said attributes omniscience to the financial oligarchs. It might be closer to ominipotence. They are certainly approaching omnipotence as a limit within the financial sphere. ((((((((( > 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 bankers thought there would be contagion in the market. We obviously have an underdetermination problem here. ((((((((( CB: That obviousness is similar to the insurance of bailout I was referring to earlier. You can't actually see it , smell it, touch it or hear it. But we know it is there through thought, you know, concepts. ((((((( 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. ====== The Fed organized a meeting, nothing more. I fail to see a conspiracy to hide omniscience or exploit the moral hazard problem in the below. ((((((((( CB: It's not a conspiracy. It's a system. Business week is not a neutral , objective, ... you know, they aren't going to expose the secrets of the capitalist system like Karl , or anything. Believe me. They got stuff going on behind closed doors. If you don't think so. Again, you got to be an anti-positivist. You can't only rely on what you can detect with your senses. You do rely on that , but then you have to make inferences concerning what you can't see. You know like Marx says, if empirical evidence and theoretical concepts were the same thing, there would be no need for science. BUSINESS WEEK ONLINE September 25, 1998 INSIDE THE LONG TERM CAPITAL MANAGEMENT BAILOUT By now, everyone knows that an historic meeting occurred on Sept. 23 at the New York Federal Reserve Bank to hammer out the bailout for Long Term Capital Management, a Greenwich (Conn.) hedge fund founded by former Salomon Inc. partner John Meriwether. The assembled 16 commercial and investment banks agreed to pony up $3.5 billion to keep LTCM in business. -clip- By Leah Nathans Spiro in New York Also: < http://www.house.gov/financialservices/101298le.htm > > 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." ======= Everybody tries to reduce risk, CB. ((((((((( CB: Did I say anybody doesn't try to reduce risk ? I'm just pointing out that the bourgeoisie are included in the category of "everybody". So, when they claim to be risk seekers, I know that's bs. ((((((( If it didn't exist [omniscience] nobody would be trying to pawn it off others. LTCM did not pawn it's risk to the public-at-large. Do you think the guys above got fleeced? They were just looking out for their self-interest. "Solidarity means sharing the same risks"; capitalists use that motto too. ((((((((( CB: I'm more into omnipotence in these guys than omniscience. The real Capitalists are the ones who get YOU take up that motto, and then do not share the same risks with you. Their motto is more like "don't share the wealth or the risk with them " > 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 ========= No, they all thought the cost of not doing anything meant an explosion of risk that would bring on collapse. They're perfectly aware of the moral hazard problem. They bailed out LTCM because they knew if the market tanked they'd have a shitload more people than just their own kind breathing down their neck. $1.25 trillion was hedged just by LTCM; the opportunity cost of not doing something was too great. The lender of last resort doctrine does not constitute a refutation of uncertainty and indeterminacy with regards to financial market transactions. (((((((( CB: Even if what you are saying is true, that LTCM was not allowed to suffer the comeupance of its risk falling due because it would hurt other companies, all you are doing is giving a cause for LTCM not having suffered its risk come due. The fact remains that, for whatever the cause, LTCM did not take a risk, because it was not forced to suffer the loss it was supposed to suffer when it socalled risk went bad. I mean speaking of knowing a lot, the people in the know would know when LTCM started that if it failed it would have to be bailed. So, somebody was that "omniscient" , I'm sure. It was foreseeable.
