3 ms·

Ah, the classic "this is fine" comment on any HN article suggesting that we may have been underestimating the scale of systemic risk. The issue that BIS is rai

Ah, the classic "this is fine" comment on any HN article suggesting that we may have been underestimating the scale of systemic risk. The issue that BIS is raising isn't the mere existence of derivatives. It's both the scale of debt and the lack of public visibility into it. The concern BIS has is basically that policy makers are making decisions that can have major impacts on price of the dollar and global interest rates. Given both the scale of this debt and it's lack of visibility, BIS is pointing out that policy makers might not have all the information they need to make safe decisions. It's neither a case of "the sky is falling" or "it is what it is". This is absolutely something that should not be shrugged off with a "meh" which is why BIS wrote the report in the first place.

brookst 4y ago
Ah, the classic "anyone who adds context to a hyperventilating article must be 100% embracing any real issue that the article misrepresented" comment ;)
lazide 4y ago
The reality is, there is no apparent limit to the side effects of monetary policy. If they attempted to quantify all of them, they’d never be able to do anything, good or bad. So, they look at the ones that have historically caused the biggest issues and are causing the most obvious pain right now, make changes that hopefully give others time to adapt to without catastrophic issues, and cross their fingers. If the things that explode are within the scope and scale expected? Then success. If not? Try to figure out what happened, and try to do better next time. There is no ‘good’ decisions in these situations, even doing nothing has major costs. It’s about the least bad decision, and trying to avoid taking on unnecessary risk and hence unnecessary pain. so far CDS’s are a potential problem, but not as big of a known historic problem as economy wide out of control inflation. So, off we go.
danielmarkbruce 4y ago
Look at the footnotes on page 71 of the BIS report. They know they are significantly overstating it and yet can't be bothered figuring it out, or making the best estimate they can. And then the reuters report lede makes it sound like pension funds are short $80 trill. People on this thread think it's what is being reported. It's awful.

brookst 4y ago

Ah, the classic "anyone who adds context to a hyperventilating article must be 100% embracing any real issue that the article misrepresented" comment ;)

lazide 4y ago

The reality is, there is no apparent limit to the side effects of monetary policy. If they attempted to quantify all of them, they’d never be able to do anything, good or bad. So, they look at the ones that have historically caused the biggest issues and are causing the most obvious pain right now, make changes that hopefully give others time to adapt to without catastrophic issues, and cross their fingers. If the things that explode are within the scope and scale expected? Then success. If not? Try to figure out what happened, and try to do better next time. There is no ‘good’ decisions in these situations, even doing nothing has major costs. It’s about the least bad decision, and trying to avoid taking on unnecessary risk and hence unnecessary pain. so far CDS’s are a potential problem, but not as big of a known historic problem as economy wide out of control inflation. So, off we go.

danielmarkbruce 4y ago

Look at the footnotes on page 71 of the BIS report. They know they are significantly overstating it and yet can't be bothered figuring it out, or making the best estimate they can. And then the reuters report lede makes it sound like pension funds are short $80 trill. People on this thread think it's what is being reported. It's awful.