The Housing Bubble, Mortgage Debt as Percent of GDP
43 minutes ago
Untangling the knotted mess of politics and finance, monitoring the edges of the known universe.
What this shows, not for the first time, is that models of the economy that incorporate the [Efficient Markets Hypothesis] - and this includes the complete markets core of the New Classical and New Keynesian macroeconomics - are not models of decentralised market economies, but models of a centrally planned economy.
First, FVA relies on efficient market theory, namely that short term price = value and that consequently income, assets and liabilities should be adjusted in real time to reflect same.... We think that the collapse of all of the other market efficiency based constructs, from structured assets to hedge funds, ends the discussion of derivative notions such as FVA.While Geithner's announcement didn't include any explicit plans for a further relaxation of mark-to-market accounting, a read between the lines suggest that's the direction he's heading. In my mind, this paragraph from the fact sheet is the tell:
Second, FVA fails to recognize the historical role of depositories, pensions and insurance companies as repositories for long-term value and consequently as havens from swings in short-term market pricing and economic trends.
The Treasury Department will work with bank supervisors and the Securities and Exchange Commission and accounting standard setters in their efforts to improve public disclosure by banks. This effort will include measures to improve the disclosure of the exposures on bank balance sheets. In conducting these exercises, supervisors recognize the need not to adopt an overly conservative posture or take steps that could inappropriately constrain lending.Call it "Increased Transparency and Disclosure" while signalling a willingness to give banks some breathing space. Orwellian, isn't it?