message from
Igor Matutinovic
Managing Director
GfK-Center for Market Research

Pedro raised an interesting question that deserves discussion - if 
anything because the last crisis cost tax-payers few trillions of 
dollars in the US and Europe.

First, we should define what do we mean by calling financial flows 
"anticipatory" information flows? Are all financial flows "anticipatory" 
and what they, if any, "anticipate".

Let equate "anticipatory" with foresight, forethought, forecast - a kind 
of "objective", "rational", forecast of future events.

Traditional activity of banking is lending to business and households by 
using a security collateral (assets, income ..). It would be difficult 
to demonstrate that this activity is anticipating or enabling any major 
change in economic structure or consumer behavior. Innovation in 
business (new technologies and marketing ideas) is usually financed by 
venture capital, which is outside the banking system. Lending in its 
traditional aspect just helps the extant structure getting bigger. It is 
"following" in the established footsteps, not "predicting", and the risk 
involved is minimal for the bank as well as the interest rate charged to 

Investment banking, on the other hand, involves sale of securities, 
facilitating mergers and other corporate reorganizations, acting as 
brokers etc.. This activity is better called speculative than 
anticipatory - speculative in terms of bets on future events like a 
direction of a stock index, or commodity. The essence of these bets is 
closer to casino gambling than to anything else. It would be meaningless 
to consider that taking a position on the "red" is "anticipatory" in any 

The origins of the current financial crisis are multiple, as is the norm 
in any complex system. In the real sector - the housing market - the 
construction of new houses must have exceeded sound demand - those 
clients that can repay mortgage (with low probability of default, which 
the bank can insure against with the insurance companies). So we start 
with an overproduction of houses which have difficulty finding quality 
buyers. To move the houses "off the shelf" the mortgage brokers turned 
to "Ninja" clients (no income, no job, no assets) and irresponsibly (!) 
concluded housing sales (cashing in their commission at NO risk) and let 
the banks finance the client. Banks in cooperation with investment banks 
afterwards securitized these (bad) mortgage loans into three tranches of 
different degree of risk (AAA; BBB; CCC) and sold them thereafter to 
other banks and investors around the world. The rating of the securities 
by independent institutions was at least irresponsible if not 
fraudulent. The whole process of selling new homes to Ninja buyers was 
based on the expectation that the housing prices will continue to rise, 
forever ... Every financial institution involved with creation and sales 
of securities (e.g. Collateral Default Obligation, or Credit Default 
Swap) based on mortgage loans ) had real or fictitious earnings or 
booked an - to be found later, fictitious - increase in the value of 
assets in the Balance Sheet. Brokers and managers wer paid their bonuses 
on the base of it.
To cut it short, the whole structure crumbled when Ninja's started to 
default on their loans, and there were too many of them to fit into 
insurance default statistics...

The learning's: financial flows were not "anticipatory" - 99% of the 
financial industry, FED, etc.. were caught by surprise. Lack of 
regulation, greed, and irrational expectations (that housing prices will 
keep increasing, that Ninja's will be repaying debt, etc..) were at the 
basis of the crash. The "informational layers" - the so called 
"structured products" or derivatives that increased the complexity of 
international financial system on one side, and blurred its transparency 
with respect with fundamentals on the other, were basically fraudulent 
and had no functional linkage to the real sector, except to help clear 
the stocks of unsold houses. But this surely was not the most 
"efficient" way to do it ...

The point is that (all) markets must be increasingly regulated as the 
global economic system becomes spontaneously more complex. 
Self-organized, informational networks (financial or whatewer) do not 
suffice to serve the need for economic and social stability of modern 
societies. Therefore, the tax-payers money must occasionally be used to 
cover damages that arise from inherent malfunctions of the market 
informational networks ...

The best

Dr. Igor Matutinovic
Managing Director

GfK-Center for Market Research
Draskoviceva 54
100 00 Zagreb, Croatia
Tel:  385 1  48 96 222,   4921 222
Fax: 385 1  49 21 223

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-----Original Message-----
On Behalf Of Pedro C. Marijuan
Sent: Wednesday, October 29, 2008 12:58 PM
To: fis
Subject: [Fis] informational economics?

Dear FIS colleagues,

Some aspects of the current financial crisis might be related to 
discussions we had in this list on information and the nature of 
economic flows years ago ("economic networks", and also, central aspects 
of ecological "ascendancy").

The amazing growth of financial assets of many kinds during last decade 
may have conduced finally to a brutal crisis like the current one, not 
just for "greed" or political lack of control, but also for dearth of 
scientific understanding. I would argue that:

1. Financial flows are "anticipatory" information flows that preclude 
the structural changes and the evolution to follow by real economic 

2. Without financial anticipation, economic changes could not keep pace 
with technology & science progress due to the "viscosity" of social and 
legal webs of relationships.

3. The creation of successive informational (financial) layers becomes 
an exercise in complexity accumulation, that almost inexorably leads to 
cross instability thresholds and a general loss resilience.

4. Though the financial info is a sort of virtual builder, a potential 
energy of sorts, it has to suffer "closure" upon the real economy; then 
its excessive flows in out from some sector (eg, housing in some 
strategic countries), amplified in the global complexity, have now 
potential to destabilize the whole financial layers and bring the real 
economy to havoc.

5. Economy is an informational systems, in crucial aspects, not well 
explained yet... advancing an "info economics" would be quite timely.

Would it be interesting to argue on some of these very roughly penned 
aspects (while our pockets get emptier and emptier)?



PS. The recent track on foundations of art is still worth of some 
further comment...

Pedro C. Marijuán
Grupo de Bioinformación
Instituto Aragonés de Ciencias de la Salud Avda. Gómez Laguna, 25, Pl. 11ª
50.009 Zaragoza. España
Telf.: 34 976 71 3526 Fax: 34 976 71 5554 [EMAIL PROTECTED]

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