Monday, December 02, 2013

The Proposal On Stress Testing Credit Unions....


... can't stress this enough !!

Let me have this year's Nobel Laureate in Economics, Lars Peter Hansen of the University of Chicago, tell you why. Here's what he said in a recent NYTimes (11/17/2013) interview:

"The science of economic model-building is very much a work in progress, he said.  "The thing to remember about models is they're always approximations and they will always turn out to be wrong," he said.  That shouldn't be a surprise, he said, and it doesn't mean that the models are useless.  "You need to ask, are the models wrong in ways that are central to the questions you want to ask, or are they wrong in ways that aren't so central?"

Busy as little bees:
"Prevailing economic models do not adequately explain the financial crisis, the severe recession or the weak global recovery, he said.  "Systemic risk" is a buzzword for politicians and financial regulators, he said, but "the truth is, we really don't know how to measure it or what exactly it is."

"This issue is critical, he said, because financial regulators are having to improvise solutions to dilemmas they don't entirely understand."  

In some quarters "the dilemmas they don't understand" are starkly "robust"*.

(Hope credit unions and regulators can be Nobel about all this!)

*robust - english noun; not to be confused with poor federal government fiscal policy ( i.e., "rob UST"); often viewed as a sign of intellectual insecurity among economists; definition/meaning - "written by an idiot".

1 comment:

Anonymous said...

Never has so much time been spent on something that provides so little valid or useful information except maybe for the weather?