The key here seems to be a vague and embryonic outline of some of the ideas of behavioural finance. How do we deal with uncertainty when there is no basis to make an estimate of probabilities? What short-cuts can the mind use to deal with these issues? One of the things that Keynes suggests here and the The General Theory is the idea that we assume that things will be rather similar to how they have been in the past. This is probably a reasonable starting point. It is conservatism. Another thing that Keynes suggests is that we look to the opinion of others. Here we get the basis for a social construction of belief.
Monday, June 21, 2010
Wednesday, June 16, 2010
There is a lot post on the FT's Alphaville looking at the position of Jerome Kerviel. There is a blurring of the distinction between market-maker and proprietary trader. The fact that cash positions were carried over from one day to the next is taken as a sign that there was more than just market-making going on.
Tuesday, June 15, 2010
Pepy's diary 13th June 1667, in the wake of the Dutch attack on Chatam:
I presently resolved of my father’s and wife’s going into the country; and, at two hours’ warning, they did go by the coach this day, with about 1300l.in gold in their night-bag. Pray God give them good passage, and good care to hide it when they come home! but my heart is full of fear: They gone, I continued in fright and fear what to do with the rest. W. Hewer hath been at the banker’s, and hath got 500l. out of Backewell’s hands of his own money; but they are so called upon that they will be all broke, hundreds coming to them for money: and their answer is, “It is payable at twenty days — when the days are out, we will pay you;” and those that are not so, they make tell over their money, and make their bags false, on purpose to give cause to retell it, and so spend time. I cannot have my 200 pieces of gold again for silver, all being bought up last night that were to be had, and sold for 24 and 25s. a-piece.