Merle, Are you or any others on this list receiving missives from John Komlos? And if so, what do you think? I think there is a new online textbook that Sam Bowles is somehow involved with, but I am forgetting details. I think Komlos advocates for that one, though he is more a peer of Sam’s group than a member. There is a similarity in their style of argument about what economics has been willfully ignoring, and should start to incorporate.
Best, Eric > On Jan 30, 2021, at 1:36 PM, Merle Lefkoff <[email protected]> wrote: > > Thank you Steve, and especially Eric. As I study new economic models for the > real economy, such as the "circular economy" and the "doughnut economy", I am > also paying more attention to the financial economy and especially the wild > and wooly stock market. I know it's unsustainable, but my hopes are > constantly dashed every time I think it's going to crash and it demonstrates > its robustness once more. > > On Sat, Jan 30, 2021 at 10:56 AM Steve Smith <[email protected] > <mailto:[email protected]>> wrote: > Eric - > > You lay this out so well. > > Some random observations. > > Minsky's Ratchet is very compelling as an explanation. As we know I'm a > sucker for understanding by analogy with mechanical technology as a common > source domain. I *think* Minsky's Ratchet is a correlate of what you later > call game-of-chicken gambling? It was the first applied (discrete) math > problem I remember being offered at college... that among the myriad > "rich-get-richer" mechanisms, the "empty pockets ratchet" is a big one... a > fair game generates a random walk which ultimately ends when one players > pockets are empty... the smaller pockets (esp. by orders of magnitude) almost > always go empty first. "It's ratchets, levers, wheels, and connecting rods > all the way down?" > I was caught off guard by your coining "an oligopoly of little fish", my > usual binding of oligopoly to "a small number", but your point of course, and > the crux of the event, is that the "little fish" schooled effectively, as if > an apex predator-shark wandered too far up the Amazon and encountered a > school of pirahna. The culture-war story, of course is a combination of the > "underdog" and the caution of the potential of "collective action"... as > you point out, this one encounter may indicate that a few sharks may yet get > stripped of flesh by schools of tiny fish, but there is no indication that > they will lose their niche in the oceans and reefs to such. > Your tentative analysis of EW and AOC also really struck me as I > (contingently) hold them both up as culture-war heroes to the underdogs I > regularly cheer for. I don't feel I have my own dog in either of their > fights, but the larger culture I want to live within (with various forms of > assertive equality and equanimity) is the one I try to support as best I can. > I am more implicated as a cause of their causes than a victim. > Understanding EW and AOC more better seems to me to be important in pursuing > my aspirations to undermine my own undue advantages. I suppose I "expect > more" of EW as a veteran, as a scholar, as a senior statesperson, and I > accept AOC's decision to play to her strengths (emotional appeals in the > culture war) but also appreciate her having a little deeper intellectual > stake (BA in Econ?) than her affect/appearance suggests. I understand (but > do not sympathize with) the olde guarde in congress being acutely skeered of > getting double teamed by AOC and Katy Porter. I look forward to more of > those "wild kingdom" takedowns on CSPAN. I don't think badly of EW's > role/position, just disappointed that she might not be achieving her full > potential? > Your practical description of the "pyramid scheme" and "exhaustion" are a > very good thumbnail for where I think this is going myself. I suppose there > IS a chance that a new species of oligopolist will emerge in the form of > swarms (school, flock, pack, ...), but I don't think we are at the edge of a > phase change yet. I'm not sure if all significant radiation events are > paired with extinction events? > Someone made a slightly different correlation than the COVID stay-at-home > free-time-to-conspire on Reddit with a COVID stimulus-check-in-hand free > energy(cash) one. Anecdotal at best I'd guess. > 'nuff for now, > > -Steve > > On 1/30/21 4:19 AM, David Eric Smith wrote: >> So I have been watching this, and it looks just like one more >> wealth-concentrator on the long term, with smaller shifts in the short term >> that people get caught up looking at because they involve personality >> conflicts. >> >> Will somebody tell me where I am wrong in the following? >> >> 1. We start with the usual state of affairs, in which hedge funds of various >> sizes take short positions; in what and how much depends on the capital they >> hold to cover the short, relative to their other options. They are “big” >> actors, in the sense that decisions of individual firms can involve >> moderately large amounts of money. They assume they are the full landscape >> of big actors, and although they act with cognizance of each other, since >> they are all using similar research, they do much the same thing. >> >> 2. A new “oligopolistic actor” comes in that changes the landscape of >> participants, which is a group of Reddit-coordinated little fish. They can >> put a short squeeze on the hedge funds. Those that took too large a >> position either with too little capital to cover the squeeze until it >> bursts, or with too little interest in this stock to be willing to take much >> of a loss on it, will sell off at a loss, and the various little fish will >> make a little money each, but it will look like a decent chunk when you take >> them together. The smaller or medium-sized hedge funds that can’t wait this >> out could be forced into low enough overall returns that their clients will >> want to withdraw from them, putting them in further trouble, perhaps driving >> some of them out of business. >> >> 3. Meanwhile: the oligopoly move is an ordinary pyramid scheme, and it only >> works as long as the pool of new buyers remains large enough to pay off the >> earlier buyers surfing the bubble. Considering that relief and unemployment >> checks amounted to many hundreds of billions of dollars, if even a modest >> amount of this is in the hands of the young men who were gamers and are now >> stuck at home, it can look as if that bubble can continue to inflate for a >> while. We might even be able to estimate, however, from the overall amount >> of free money spent into the system, and the part of the public that this >> young-male demographic accounts for, what the potential size of total >> gambling capital is for this thing. >> >> 4. While attention is on the oligopoly of small fish, and the unprepared >> mid-sized or small hedge funds that might go bankrupt, there are always >> larger actors who are well capitalized and can wait out bubbles. They may >> not have taken positions in this before, when it wasn’t all that >> interesting, but now seeing that there is a bubble afoot, they had a reason >> to get in and go short early. They can outlast the short squeeze, and have >> a reason to do so because of point 5 (next): >> >> 5. The pyramid will end when the new buyers are exhausted, and that will be >> the end of any power for the little-fish oligopoly. At that point everybody >> who is leveraged will be underwater. Because a lot of this money was in >> options, the unwinding will be very fast, much faster than if it were just >> driven by a sell-off of the underlying. The last wave of buyers in will >> lose essentially whatever they spent. Whichever little fish happened to get >> out of the bubble before that will collect some of the money from that last >> wave, and the larger hedge funds who were waiting out the short squeeze will >> then collect the rest. >> >> >> So, when the dust settles, the net effect? Some money will have changed >> hands in a quasi-random way, from many small fish who gambled the rent and >> couldn’t afford to lose it, to a smaller number of other small fish who will >> collect at varying multiples, but still not enough to meaningfully alter >> their life trajectories. The Reddit board-makers might collect enough to >> happily go on to the next scam, but they will not be breaking into any >> Forbes lists. However, in the net, there will have been a flow of money out >> of both the oligopoly of small fish and the small or mid-sized hedge funds >> that didn’t see it coming, and into the wealth of the large funds. In >> addition to the direct winnings of the large players, because their returns >> to their clients will go up, they will collect new clients that jumped ship >> from the hedge funds that bought back out of the short squeeze at a loss. >> >> So the macro-thing that will happen is the macro-thing that happens through >> every other mechanism: whoever has the most capital can wait out the largest >> spectrum of risks, and will on average gain more capital. This is the >> ratchet that works through everything. It is not a Fama-French efficient >> market mechanism, because it works through differential action of >> constraints, not through Arrow-Debreu “complete” price systems. It is not >> quite the same, but still related to, the bubble-bailout cycles that I have >> termed Minsky’s Ratchet, from the arguments made by Hyman Minsky in >> Stabilizing an Unstable Economy. >> https://www.amazon.com/Stabilizing-Unstable-Economy-Hyman-Minsky/dp/0071592997 >> >> <https://www.amazon.com/Stabilizing-Unstable-Economy-Hyman-Minsky/dp/0071592997> >> >> >> For AOC to be seeking media attention, when there was an early trading >> freeze, to criticize the hedge funds for looking for protection against the >> oligopoly doesn’t surprise me, because this is a culture-war thing and >> responding in the moment to that is what she does. But for Warren >> (Elizabeth, not Buffett) to allow that to be her caught-on-camera moment >> surprises me, and seems regrettable. Yes, EW is as motivated as AOC to >> criticize the use of access by the hedge funds to seek protection when they >> get beat at their own game, and both are right to mock them and welcome them >> to go under. But EW’s career has been about how the ratchet of unequal >> capital constraints moves capital from the small to the large, and if what I >> said above is correct, I would assume this would be the biggest picture in >> her view. In the long term, the people who will get hurt mainly are just >> the people she has made a profession of trying to protect. I would think >> she would want her on-camera moment to be about not getting distracted from >> that, and worrying that, yes, market regulations and taxation that encourage >> game-of-chicken gambling are The Urgent — and structural — Problem. Whether >> some gambling hedge funds get caught and go under is a sideshow. AOC, too, >> of course is plenty smart to understand all this (if what I have said above >> is not wrong), and I expect she probably does. (She was an econ major in >> college, right?). But her media incentives are a bit different, so for her >> to mostly emphasize the culture-war thing doesn’t seem strange. >> >> So is the above roughly correct? Or do I misunderstand the structure badly >> enough that I am drawing the wrong macro-conclusion? >> >> Eric >> >> >>> On Jan 29, 2021, at 6:45 PM, uǝlƃ ↙↙↙ <[email protected]> >>> <mailto:[email protected]> wrote: >>> >>> Yep. I've logged into my TD Ameritrade account several times to see if >>> they've limited purchases of GME. Supposedly Robinhood did limit purchases. >>> It looked like I could always buy on TDA... but I'm not sure. I would never >>> actually buy GME, *except* to screw The Man. 8^D >>> >>> On 1/29/21 3:41 PM, Merle Lefkoff wrote: >>>> Has anyone been watching what's happening in the stock market with >>>> GameStop? >>> -- >>> ↙↙↙ uǝlƃ >>> >>> - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . >>> FRIAM Applied Complexity Group listserv >>> Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam >>> un/subscribe >>> <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fbit.ly%2fvirtualfriamun%2fsubscribe&c=E,1,paYmZ_wy_-SS4VeXGVng0tBHqSF8mNTQlNtl1M7-FGVivW6UkSUOpyQ2Vci4y89sViZinJk3owPtBUOWBTlSXx-L9PDhGA6Ptl4lq_RvZNwFGugpSLE,&typo=1> >>> >>> https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fredfish.com%2fmailman%2flistinfo%2ffriam_redfish.com&c=E,1,vjPYuWV_SOqXmjm9v6nfchPYvTQOERJqzYuZ2EvGnKR7L9JjDHkhv09DfpBYVvGe1tHPFt0RRGwq0ChNxd4eziP-rcFnAxXsqnUAkkBW&typo=1 >>> >>> <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fredfish.com%2fmailman%2flistinfo%2ffriam_redfish.com&c=E,1,vjPYuWV_SOqXmjm9v6nfchPYvTQOERJqzYuZ2EvGnKR7L9JjDHkhv09DfpBYVvGe1tHPFt0RRGwq0ChNxd4eziP-rcFnAxXsqnUAkkBW&typo=1> >>> FRIAM-COMIC >>> https://linkprotect.cudasvc.com/url?a=http%3a%2f%2ffriam-comic.blogspot.com%2f&c=E,1,Ng1EbcI2wHi1MUdaZwXmDZg2LgvtvJqHf7DOlh3YY2zT6TsytRdo9rGgU_AUtySrheyJhbod7GCSTftIa0Lyq26aHcwK5Q1ssH2dO5zJRMKCITI,&typo=1 >>> >>> <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2ffriam-comic.blogspot.com%2f&c=E,1,Ng1EbcI2wHi1MUdaZwXmDZg2LgvtvJqHf7DOlh3YY2zT6TsytRdo9rGgU_AUtySrheyJhbod7GCSTftIa0Lyq26aHcwK5Q1ssH2dO5zJRMKCITI,&typo=1> >>> archives: http://friam.471366.n2.nabble.com/ >>> <http://friam.471366.n2.nabble.com/> >> - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . >> FRIAM Applied Complexity Group listserv >> Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam >> un/subscribe >> <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fbit.ly%2fvirtualfriamun%2fsubscribe&c=E,1,m30PyCZTBsQzLCDQ3IYUVkhA8rRzIzux-uPAxyPXsF941tB643EI1dACLMhXYBR8UfzoFZG-9iPbg7rJxgVQOrKJoPZBMqnRJkEGasv3j20,&typo=1> >> http://redfish.com/mailman/listinfo/friam_redfish.com >> <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fredfish.com%2fmailman%2flistinfo%2ffriam_redfish.com&c=E,1,ZNOEdGVOKnBGj9BGneK1pHm8uLaiaZmGaVbcgbhg3rM4nJ6WA8VoB0WKY2xQSlD3XiVVe4ST0cA_cm4kKz8tzHPXF0HVeABV7Hvf2VCZXKaQdfWRU4xIBw,,&typo=1> >> FRIAM-COMIC http://friam-comic.blogspot.com/ >> <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2ffriam-comic.blogspot.com%2f&c=E,1,Ftf8pAEJ3-hyJ6zY3IdOSwmi72Or0fguNo3jZWBdNBNaO0hRe4SN-a8jk9fes5_Rm4hEN8-Q4Dj8hQsxxzZwfzZOmcsjzRApG3UAEPQdb_Sjqg6N&typo=1> >> archives: http://friam.471366.n2.nabble.com/ >> <http://friam.471366.n2.nabble.com/> >> > - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . > FRIAM Applied Complexity Group listserv > Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam > <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fbit.ly%2fvirtualfriam&c=E,1,IGJSLslXh-qiEt6-GIi7UrmXSe_MCwFRnlR7snh8xS6IQNhLnhLA2I0HIn2PRiN28O1rWQULrUPLI5_S73SHcvHGsKpdEpBesFBNiczB1Jtzbh4KI7jg&typo=1> > un/subscribe http://redfish.com/mailman/listinfo/friam_redfish.com > <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fredfish.com%2fmailman%2flistinfo%2ffriam_redfish.com&c=E,1,dWhPOtp2Kca0feWqqRakoK83-ZvRrAIhEmk9MQgm0ANPdTmjrKIV4r_6cFFBWOa6Qpl4fFObQLJV_VCWNTxI1NiBUpdvKyITVqN1iixsZ4yFLylOLPQ1Xk_5&typo=1> > FRIAM-COMIC http://friam-comic.blogspot.com/ > <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2ffriam-comic.blogspot.com%2f&c=E,1,bcEyTxl9diqAKL9Z2ju-dw-0a4ly2NCBfcmGRLBXUP4IGyZmAlNGLTgdWJmaWdkNeM3weZdKQAPr-SaU_0bPa_cvCRD-l0jdVwZzQCc_1Q,,&typo=1> > archives: http://friam.471366.n2.nabble.com/ > <http://friam.471366.n2.nabble.com/> > > > -- > Merle Lefkoff, Ph.D. > Center for Emergent Diplomacy > emergentdiplomacy.org > <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2femergentdiplomacy.org&c=E,1,m6e7Qvdlpzi6ZIl1kltiCACBhn76nB00Tv2Ozmi3N2zj-6q3b0kK6BQe44vesvvufibCPnKvUxUAeP33j2UDgdHpJHZj-FSW1egv2-sO7yuCe89K1y1aHRq6&typo=1> > Santa Fe, New Mexico, USA > > mobile: (303) 859-5609 > skype: merle.lelfkoff2 > twitter: @merle110 > > - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . > FRIAM Applied Complexity Group listserv > Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam > un/subscribe > https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fredfish.com%2fmailman%2flistinfo%2ffriam_redfish.com&c=E,1,W8QpgJ7f39_LPU4AnkfqvdLyKv88d8rumNxoD7SKRh7tbj6fS_IHNRzhggxsonJ8Q57a__ghvc08nhw6sj4VA3BzYTBsQ2_BTypcUv-yvTOEb6w8ETUp&typo=1 > FRIAM-COMIC > https://linkprotect.cudasvc.com/url?a=http%3a%2f%2ffriam-comic.blogspot.com%2f&c=E,1,HHH-UQRlKFDaCHgpwI9kN9tkANk0vQ1KkaI3-C7eeSNigOrBrH0tI4cmHtQB4MwxtIgXRGqKHxCbR0hclCihyYXc0skY8z5OxSASv7-sBk597MQ,&typo=1 > archives: http://friam.471366.n2.nabble.com/
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