One might describe this whole discipline of securitization as wanting 'something from nothing' (not unlike efforts at perpetual motion) as the absence of a basis to understand the essential control issues leads to gaming and messes, much like we see now. The natural metaphors, that are founded in the sciences, only have a tenuous use. The computer? It's mainly led us down a path to perdition.
This whole game starts with money (in more than the modern senses) which can be stable but, by choice, is not. The physical basis for money does not have to be something of historic value. That we have not explored these other techniques more fully is because of entrenchment, not unlike the Big 3's delay in considering options for other types of vehicles.
Then, there is a whole series of instabilities added in modern finance via derivatives and processes that do not allow the full amount of bookkeeping that is required. That the current mess was precipitated by the sub-prime problem is basically coincidental. The house of cards would have fallen for some other reason eventually.
We'll be looking at all this more fully.
08/01/2013 -- We'll be looking at financial engineering, more closely.
04/03/2011 -- Need to look at some background. Too, tranche and trash.
08/17/2009 -- As promised, FEDaerated is here.
07/23/2009 -- After the bust and the rebound, toxic assets are still a problem due to tranche realities.
06/17/2009 -- Michael Milken says that structure counts (see WSJ article). Remember, the theme here is that a lot of securitization is bunk, many times. Sheesh, talk about a perpetual motion machine, always moving monies from the pockets of the hapless to that of the fat cats.
05/27/2009 -- That we have topsy-turvy needs to be addressed more fully in both an epistemologic and an operational sense.
04/17/2009 -- Minsky and the facts of ephemeral value are a couple of topics on the list.
03/30/2009 -- The WSJ today looks at the Future of Finance. The idea is that finance is like the cardiovascular system. Okay. So leeches are a good metaphor for the sucking out that we see. Like the AIG guy who was central to the losses that we the taxpayers are paying and who left with $300M. We'll be referring back to this discussion.
03/25/2009 -- Rhetoric can be fun, but we have to get into these issues with depth and technicalities.
02/27/2009 -- There are many aspects and viewpoints and issues related to finance. It's too bad that the experimentation must be done on the fly. Many lessons are still to be learned.
02/18/2009 -- Actually, that financial engineering looks to the real engineering and the sciences is right on. That is, there are natural analogs for the market and other activity; yet, the work is half-way, at best; it is not sufficient to try to use physics, or even biology. Why? It's a topsy-turvy thing that will require us to establish and use a mathematics (to be discussed further). Of course, bayesian and other adaptive methods are not a bad start or a waste of effort. Yes, the computer will be central. See Truth Engineering.