‘National mania’ blamed for Irish crisis

The FT.com on the report about Irish banks. The national speculation seems to be a feature of all such financial crises. It is obvious in retrospect. At the time, everyone is part of it and after none will take responsibility.

"Mr Nyberg said the attendant risks went undetected or were seriously misjudged by regulatory authorities “whose actions and warnings were modest and insufficient”.

A “happy go lucky” attitude prevailed during the period, including among the bondholders that lent to Irish banks.

“When it all ended, suddenly and inexplicably, participants had difficulty accepting their appropriate share of the blame for something in which so many others were also involved and that seemed reasonable at the time,” the report states"

Economist's View: Empirical and Historical Validation of Macroeconomic Models

Economist's View looks at the failure of the Bernanke type economic accelerator model to explain much of the deviation in output. However, this is rather the same as the failure of the short period of housing data to show the possibility of a simultaneous fall in house prices across the country.

"That was a mistake, but what is the lesson? One is that we should not necessarily ignore something just because it cannot be found in the data. Much of the empirical work prior to the crisis involved data from the early 1980s to the present (due to an assumption of structural change around that time), sometimes the data goes back to 1959 (when standard series on money end), and occasionally empirical work will use data starting in 1947. So important, infrequent events like the great Depression are rarely even in the data we use to test our models. Things that help to explain this episode may not seem important in limited data sets, but we ignore these possibilities at our own peril."

Spanish rates and the ECB

FT.com / "Almost all Spanish mortgages are based on the one-year Euribor money market rate, which is now close to 2 per cent, and rising"

What will people do for money?

What will people do for money?: "In the hypothetical scenario, 64 percent of participants said they would never administer a shock to someone else for money. However, in the real world that number changed, and in a big way. When faced with real money, 96 percent chose to shock the person in the other room for money."

Fixed income hedge funds

The FT looks at fixed income and some of the key players and strategies in the market:

"The resources and infrastructure required means that yield curve hedge funds tend to exist inside banks and the largest asset management firms. In Europe, well-known credit exponents include Trafalgar Asset Managers and BlueBay Asset Management, while yield curve funds include Brevan Howard, Moore Capital, Comac Capital and Prologue Capital."