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Matt Taibbi - Taibblog - The real price of Goldman’s giganto-profits - True/Slant
Taibbi gives a good rant on the subsidies that boosted Goldman Sachs profits to record levels.
Postmodern Economists, Empiricist Sociologists? The Problem of Unobservables « A (Budding) Sociologist’s Commonplace Book
In an excellent paper in a similar vein, Espeland and Hirsch (1990) give numerous examples of the kinds of manipulations possible of accounting profits that, they argue, made possible the conglomerates of the 1960s. Especially popular tricks allowed firms to count the earnings of acquired firms retroactively, thus increasing the apparent profitability of the firm post-merger
Bronte Capital: Watch those baskets: Why Citigroup should be allowed to merge with Wells Fargo
More bluntly I think the US should end this crisis with substantially fewer banks – which because they have a high degree of market power should be highly profitable. The high level of profitability will
(a). Reduce the incentive for banks to take excessive risks (if you have a goose that lays golden eggs it does not make sense to risk killing that goose), and
(b). Increases the chance that the banks can work through any problems that they do have (because the underlying franchise will generate enough profit to fill any holes).
FT.com / Comment / Opinion - Adam Smith's market never stood alone
By Amartya Sen
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Perhaps the biggest mistake lies in interpreting Smith’s limited discussion of why people seek trade as an exhaustive analysis of all the behavioural norms and institutions that he thought necessary for a market economy to work well. People seek trade because of self-interest – nothing more is needed, as Smith discussed in a statement that has been quoted again and again explaining why bakers, brewers, butchers and consumers seek trade. However an economy needs other values and commitments such as mutual trust and confidence to work efficiently.
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There were, in fact, very good reasons for mistrust and the breakdown of assurance that contributed to the crisis today. The obligations and responsibilities associated with transactions have in recent years become much harder to trace thanks to the rapid development of secondary markets involving derivatives and other financial instruments. This
occurred at a time when the plentiful availability of credit, partly driven by the huge trading surpluses of some economies, most prominently China, magnified the scale of brash operations.
infinite thØught: marazzi on the violence of financial capitalism
What is a financial market? Textbooks tell you that it is a way of financing the economy. Only 1% of capital accumulated in financial markets is used for investment, the rest is self-financing. Finance is not a way of financing the real economy but of increasing profits beyond the real economy.
Interfluidity :: Is the Prime Rate a Scam?
When I was a kid, the "prime rate" was something they announced on the news like it was something important. They don't do that any more, because the prime rate no longer is important. The prime rate is supposedly "the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers)". But the most prominent businesses no longer benchmark their loans against the prime rate. They use LIBOR instead. Only consumer and small business loans are typically indexed against Prime. LIBOR became prominent, well, around the early nineties I think.
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