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Current Affairs with the application of Microeconomics and Macroeconomics
As for now, i strongly believe that asymmetric information is one of the law of nature. It is because it greatly create invisible barriers between us. For instance, some people see the true facts as untrue fact and likewise, others see untrue facts as true facts. This can be justified for many occasions. Specifically, you need a credible stuff to prove that you are providing true fact. Common sense will tell you that you can believe this person provided that he possess credible thing. It can be either true or false. Consider the Madoff scandal. I extracts some information from wiki.Financial analyst Harry Markopolos complained to the SEC's Boston office in May 1999 telling the SEC staff they should investigate Madoff because it was impossible to legally make the profits Madoff claimed using the investment strategies that he claimed to use. In 2005 Markopolos sent a detailed 17 page memo directly to the SEC, entitled The World's Largest Hedge Fund is a Fraud. In part, the memo concluded:
Bernie Madoff is running the world's largest unregistered hedge fund. He's organized this business as "hedge fund of funds privately labeling their own hedge funds which Bernie Madoff secretly runs for them using a split-strike conversion strategy getting paid only trading commissions which are not disclosed." If this isn't a regulatory dodge, I don't know what is.
What happens next is that his claim was rejected. The rationale is that he is nobody and Madoff was ex-NASDAQ chairman. In this case, the past job position is the credible thing for SEC to reject that warning. Today, you see a lot of investors who put their money in Madoff's fund 'crying'. It should clearly prove why it is really in part of law of nature. In my humble opinion, this Madoff scandal will greatly affect the flow of money in money market globally.
In addition, I understand Berkeley economics professor, DeLong's frustration about the US press corps giving the wrong information. I quote his frustration from his blog.
I have spent three hours on the phone over the past two days trying to offset the consequences of three pieces of journalistic malpractice in the coverage of Christie Romer down the hall--Kelly Evans and Brenda Cronin of the Wall Street Journal who fear she is a milksop who will not dare contradict Larry Summers, Mike Allen of the Politico and James Barnes of the National Journal who say that she is a secret supply-sider, and John Judis who says that she is opposed to Obama fiscal policy.
That's three hours I am never going to get back.
In all of these conversations, eventually my interlocutor says: "But if what you say is true, then you are saying that the journalist"--Cronin or Evans or Judis or Allen or Barnes--"is simply not competent to write the story. Is that what you are saying?"
And I have come around to replying: "Yes. That is what I am saying."
Does anybody have a suggestion as to a more polite way that I can deal with people who say: "But if it isn't true, why did this reputable news organization"--the WSJ or Politico or the National Journal or TNR--"print it?"
Anybody? Anybody? Bueller?
That is why I do not edit people's work just in case the meaning of the work is destroyed by misconception. In addition, given the power of asymmetric information, I often let people to decide whether it is true or not. Simple to say, people with the right mindset and the right knowledge will know what is going on.
Meanwhile, in two years ago, many people never foresee the housing bubble that trigge the sub-prime crisis. In particular, very few people tried to warn about it. Consider my thought. Given the presence of asymmetric information, their warnings must have dismissed with the claim that the forces of market will settle it. Forces of market will equilibrate the interest rate and real money balance. Alternatively, the Fed thinks it can be controlled. In fact, i am not sure the exact problem because there are many different versions of explanation on how it happen. One thing for sure is that the borrowers have run out of the money and hence are unable to pay interest and principal payments to the banks. This should trigger the sub-prime. All the pass-through securities, mortgage-backed bonds, asset-backed securities, collaterialised mortgage obligations are now worthless. It is because there are no assets to back it.
Unknowingly, it also lead to credit crisis. Due to adverse selection and moral hazard, commercial banks in all countries are not willing to lend money. Even when the central banks in different countries initiate the open market operation expansionary. This certainly lead to a decline investment and consumption. Not wanting to let economy worsen further, the Fed tries to use another monetary expansionary policy using the discount window to encourage commercial banks to borrow. At that time, many economists already see that the Fed is going to do Japanese style just what Bank of Japan has done in 1990s to tackle the liquidity trap. Unforunately, commerical banks still do not want to lend. It seems that the asymmetric information is creating bigger invisible barriers. Simply, they do not know who they should lend to. Meanwhile the automobile industry in US is affected. Due to shortage of cash flow, three US big automobile firms are asking for bailout. Are they trying to take advanage of unprecedented acts which the Fed and the government has done. For instance, with the help of big Wall Street banks, the Fed of New York bailed out Long Term Capital Management, which is hedge fund. Again, the Fed has bailed out the Bear Sterns and AIG, which are investment bank and insurance company respectively. Last time, I mention in the past blog entry that the great depression will not happen again because of the mechanisms that prevent. Bail out is one of the mechanims. Strictly speaking, the original purpose of bail out is to save commercial banks only, not investment banks and other firms. Yet, the Fed misuse it and let Lehman Brother becomes bankrupt. It implies that moral hazard, as one of the asymmetric information component, is showing its real head. In other words, many firms may try to take excessive risks to solve the cash flows and let the government to bail out if such measures do not work. Are three US automobile firms too big to fail? Yes, they are but they should take the blame of not managing the cash flow properly. Japanese automobile firms seem to be cope with big losses well. Just few weeks ago, the Fed already lower the interest rate to between 0 to 1/4 percent. The Fed chairman Bernanke is using quantitative easing, which is developed by Bank of Japan in the first place. It seem that it is some kind of unofficial fourth money expansion policy. American economy will more or less experience just like Japanese economy in 1990s.
Today, there are few targets the Fed and US government must do.
1)They need to control public's expectation successfully. This is the first step.
2)They need to consult Keynesian Economics before deciding what kind of fiscal policy they need to use. Generally, they should not stick to what textbooks talk about. There is a need to use creative to perform unique policy action. This is what i agree with Mankiw and Krugman about getting out of the textbook.
3)They must monitor how long they can stablise with the use of policies. In my opinion, the lag in goods market and money market is so great that the public is taking time to adjust.
4)They need to get whole world to co-ordinate the open economy policy. In practice, it is very difficult to achieve. There will be a lot of disagreements on how each country should operate because of each country's interest and infrastructure.
That is all I can think. I may have missed some important points. As for now, i rarely read local media but I frequently read New York Times, Wall Street Journal, and Guardian. I find that their articles are much more interesting and engaging to read than local ones.
Textbooks
I have done reading required chapters for most of the textbooks. My suspicion is confirmed that the authors have different methods to explain. It happens most of the time when I read economics. In fact, Macroeconomics is the most controversial subject I ever study. Fortunately, i manage to find one interesting Macroeconomics textbook that outline different field of thoughts neatly. Because of this, I am able to identify which model belong to which school of thought. There are different school of thoughts in Macroeconomics. They are Classical Economics, Neoclassical Economics, Keynesian Economics, New Keynesian Economics, New Classical Economics, and Monetarist. So far my complaint for all Macroeconomics textbooks at immediate level is poor coverage on international Macroeconomics topics, especially open economy. For the Finance field, most of the textbooks use the same models. There is no problem for anyone to follow finance field unlike economics field. I still believe that it is extremely important to read and cross-reference textbooks to confirm that one is learning the right material. It is not surprising to see some minor or major mistakes in some textbooks for any subject. At the same time, if you read one book, you will miss out a lot of important information from other textbooks that really aid you in understanding on particular model. I quote from The Negotiator movie:
I try to read all the books on a subject. Get the facts. Then decide what really happened.
That is how you should study on certain thing in work or school. Sometimes, it is best to learn your own mistakes by your own. It proves to be conductive when you realise it rather than someone pointing it out for you. This can only be understood if you have experienced it. Sadly, some lecturers do not possess enough understanding to clarify challenging questions possed by students. Melvin and I experience them before. Oh well, we have to self-study if we want to have greater understanding. There is thin line that put 'understanding' and 'memorising' apart. 'Understanding' give you the ability to explain logically whereas 'memorising' do not give you the ability to explain logically but produce the similar work as if he/she is performing magic.
Terrance Tao
When Greg Mankiw, Harvard economics professor, talked about Terrance Tao's airport mathematics puzzle, he wrote to name him as star mathematician. For the moment I read this, I never hear of this man before. It looked like that there were more things for me to venture outside. I guess his name is probably well known around academic world, in particular, at America. Anyway, I checked out who he was. I found his general advice about dealing with mathematics impressive. I do agree with his well-picked advices from other mathematics professors. I like one of his general advice. This general advice is the kind I encounter many times. Many people, irregardless of their age, do not want to learn the simple stuff. Seriously, such stuffs are simple in the first place. It can be understood only if one bother to read and think carefully. After reading his work, I respects Terrance Tao for what he achieved before,and does now.
The content in next Blog entry
I think i will blog after my Valuation and Security Analysis exam, which is on June.
After exam, I am thinking of travelling around east area of Singapore for few hours before I start applying jobs. At this moment, I am doing a lot of questions for all the subjects I am currently studying. Hence, I do not have time to blog from now till June.
My Movie quests
Ms. Kim's Million Dollar Quest (Korean Drama 2004)
Synopsis extracted from wiki.d-addicts.com:
On her wedding day Kim Eun Jae is left standing at the alter by her groom, Yoo Young Hoon, for wealthy Suh Woo Kyung. Her wedding photographer, Park Moo-yeol, is a rich playboy who helps Eun-jae avoid embarrassment by pretending to be her husband. Soon after Moo-yeol's family goes bankrupt. The family home will be sold if he can't come up with money quick. Eun Jae meanwhile is convinced that if she becomes wealthy Young Hoon will come back to her.
Eun-jae and Moo-yeol decide to join forces. They move in together and invest in moneymaking schemes one after the other. Making money unfortunately isn't as easy as they had hoped. As outside forces (and Woo Kyung) line up against them, the two begin to realize that though they may be unlucky in money they are very lucky in love.
Rating:7/10
Bonuses:1)Bickering does do good to you 2)Wasting things including money is a sin.
Soredemo Boku wa Yattenai (Even So, I Didn't Do It)(Japanese Movie 2007)
Synopsis extracted from imdb.com:
A young man is falsely accused of molesting a high-school girl on a train. He is arrested and charged, and goes through endless court sessions, all the while insisting that he is innocent
Rating:9/10
Bonuses:1)Very artistic movie 2)The ending leave some of us bitter taste 3)It probably portray realistic life 4)Law do not protect you at all.
Get Karl! Oh Soo Jung (Korean Drama 2007)
Synopsis extracted from hancinema.net:
April 1, 1999 was the day of Man-soo’s wedding and also the very same day when he’d hear the results of the last screening process of the bar exam. His bride is his high school sweetheart, who he relentlessly pursued for many years, indulging every whim of hers. In high school, Man-soo was on the varsity golf team but when Su-jung told him that she’d go out with him only if he got into Seoul National University Law School, he gave up his golfing dreams and studied hard to get admitted to SNU. He finally gained admittance to SNU and dated Su-jung... But his relationship with Su-jung was more like a master-servant relationship with him being the servant. 5 years later, Su-jung agreed to marry Man-soo.
On the day of his wedding, Man-soo learned that he failed to pass the bar exam but he consoled himself that it wasn’t a big deal because he’d be marrying the girl of his dreams. But when Su-jung heard from Man-soo that he didn’t pass the bar exam, she ran out of the wedding hall...
8 years later, Su-jung is still single at the age of 34 and works as a manager at the same jewelry store where she began her career. She is a boss who makes outrageous demands on her employees. She is especially upset about her circumstances because her two friends who weren’t as pretty as her, married rich professionals and live in the lap of luxury. But what makes matters worse is that Young-ae, who used to be a part of her entourage, is now the owner of the jewelry store. Su-jung’s friends advise her to marry any decent guy she can find, but her pride won’t let her settle for anything less than Mr. Right. She dreams of being whisked off her feet by a man like Han Ki-ju, a character that appears in “Lovers in Paris,” and unless she meets a guy as rich as him, she’ll never get married. One day, she is reunited with Man-soo, who is now a top-ranked professional golfer on the U.S. PGA Tour...
Rating:6/10
Bonus:1)Is that true love in this drama?
Public Enemy Returns (Korean Movie 2008)
Synopsis extracted from hancinema.net:
KANG Chul-jung has been a detective fighting crime for 15 years, but he leads a financially insecure life. Meanwhile, the men he’s put behind bars in the past are now doing much better for themselves, which drives Chul-jung to regret choosing to be a cop. On the other side of the spectrum is Jae-young, the wealthy honcho of a large network of businesses including finance, butchery, construction, and entertainment, as well as a number of clubs. He trains young boys to work for him while at critical times forcing them to take the fall on his behalf by falsely confessing to the crimes he committed. KANG Chul-jung feels an incredible anger towards Jae-young, who is quick to turn young boys into criminals for his own selfish gains. Chul-jung vows to get him.
Rating:7/10
Bonuses:1)hand-to-hand fighting actions 2)justice has a long arm to catch you no matter where bad guys go.
Hellboy 2 The Golden Army (Hollywood Movie 2008)
Synopsis extracted from imdb.com:
In this continuation to the adventure of the demon superhero, an evil elf breaks an ancient pact between humans and creatures, as he declares war against humanity. He is on a mission to release The Golden Army, a deadly group of fighting machines that can destroy the human race. As Hell on Earth is ready to erupt, Hellboy and his crew set out to defeat the evil prince before The Golden Army can destroy humanity's existence.
Rating:6/10
Bonus:1)superhero is in action to prevent the most dreaded army.
Wall-E(Hollywood Movie 2008)
Synopsis extracted from imdb.com:
In a distant, but not so unrealistic future, where mankind has abandoned earth because it has become covered with trash from products sold by the powerful multi-national Buy N Large corporation, WALL-E, a garbage collecting robot has been left to clean up the mess. Mesmerized with trinkets of earth's history and show tunes, WALL-E is alone on Earth except for a sprightly pet cockroach. One day, Eve, a sleek (and dangerous) reconnaissance robot, is sent to earth to find proof that life is once again sustainable. WALL-E falls in love with Eve. WALL-E rescues Eve from a dust storm and shows her a living plant he found amongst the rubble. Consistent with her "directive" Eve takes the plant and automatically enters a deactivated state except for a blinking green beacon. WALL-E, doesn't understand what has happened to his new friend, but true to his love, he protects her from wind, rain, and lightening, even as she is unresponsive. One day a massive ship comes to reclaim Eve, but WALL-E, out of love or loneliness hitches a ride on the outside of the ship to rescue Eve. The ship arrives back at a large space cruise ship, which is carrying all of the humans who evacuated earth 700 years earlier. The people of earth ride around this space resort on hovering chairs which give them a constant feed of TV and video chatting. They drink all of their meals through a straw out of laziness and/or bone loss, and are all so fat that they can barely move. When the auto-pilot computer, acting on hastily given instructions sent many centuries before, tries to prevent the people of earth from returning, by stealing the plant, WALL-E, Eve, the portly captain, and a band of broken robots stage a mutiny.
Rating:9/10
Bonuses:1)Wall-E meets Eve 2)nice love story 3)it is insightful for me to see how humans suffer in the hand of laziness 4)quality CGI
Hello God(Korean Drama 2002)
Synopsis:
The story is about a bright and innocent 27 years old guy Haru(Yoo Gun) with an IQ of 65.Because of his issues he is neglected by society and frowned upon, but he tries to be optimistic and not let it bother him. Seo Eun-Hye (Kim Ok Bin), a fumbling swindler running from the cops and who only believes money can bring her happiness, and love will bring more sadness then it's worth. One day she meets this boy and he completly changes her outlook on life.
Rating:7/10
Bonuses:1)Haru factor 2)Seo Eun-Hye is a plus factor for me. Sort of like her character and expression.
The Dark Knight (Hollywood Movie 2008)
Synopsis extracted from imdb.com:
Batman raises the stakes in his war on crime. With the help of Lieutenant Jim Gordon and District Attorney Harvey Dent, Batman sets out to dismantle the remaining criminal organizations that plague the city streets. The partnership proves to be effective, but they soon find themselves prey to a reign of chaos unleashed by a rising criminal mastermind known to the terrified citizens of Gotham as The Joker.
Rating:9/10
Bonuses:1)excellent acting by Joker 2)Explosive actions between Batman and Joker 3)we can follow the flow of the story at ease. 4)It make your pop corn meal pleasant.
Death Bell (Korean Movie 2008)
Synopsis extracted from crunchyroll.com:
About 200 days prior to the college entrance exam, a school manages a cram course for its top 20 students. Evaluated only by their grades, school life is so stressful that some students suffer from serious mental problems. A sudden piano solo of "Fur Elise" wakes up the sleeping students and a screen shows the top student, Hye Yeong, dying in a water tank. A voice asks the students to solve a question, to decide the fate of Hye Yeong.
Rating:6/10
Bonus: A horror movie in disguise. You shall find out if the ghost really exists.
Kung Fu Panda (Hollywood Movie 2008)
Synopsis extracted from imdb.com:
It's the story about a lazy, irreverent slacker panda, named Po, who is the biggest fan of Kung Fu around...which doesn't exactly come in handy while working every day in his family's noodle shop. Unexpectedly chosen to fulfill an ancient prophecy, Po's dreams become reality when he joins the world of Kung Fu and studies alongside his idols, the legendary Furious Five -- Tigress, Crane, Mantis, Viper and Monkey -- under the leadership of their guru, Master Shifu. But before they know it, the vengeful and treacherous snow leopard Tai Lung is headed their way, and it's up to Po to defend everyone from the oncoming threat. Can he turn his dreams of becoming a Kung Fu master into reality? Po puts his heart - and his girth - into the task, and the unlikely hero ultimately finds that his greatest weaknesses turn out to be his greatest strengths.
Rating:8/10
Bonuses:1)Good morale of story:Do not worry on how you do. Do what you can 2)Indeed, best student is usually the one everybody think that this one is the lousiest. 3)Patience counts the most if you want to master a skill.
You are in far away nation(Korean Movie 2008)
Synopsis extracted from hancinema.net:
Old-fashioned Soon-yi marries into a family in the country without love. But when her husband abandons her by enlisting into the Vietnam war, she wants to show that she is capable of loving him. She uses her vocal talent to join a band heading there and sings for the restless soldiers in hopes of meeting her husband while on tour.
Rating: 7/10
Bonuses:1)You are looking at 100% faithful wife 2)admiration of how she travel to find her husband in the land, where it is at war.
Hancock (Hollywood Movie 2008)
Synopsis extracted from imdb.com:
The powerful alcoholic and clumsy John Hancock is the most hated person in Los Angeles, as in spite of saving lives, he also destroys properties causing high cost to the city to fix his damages. When he saves the life of the PR Ray Embrey from a train, the executive feels in debt with Hancock and decides to change his image. He brings the anti-hero to have dinner at his home, and introduces him to his son and fan Aaron and to his wife, Mary. But Mary does not want Hancock in her life.
Rating:6/10
Bonus:1)A unknown superhero that you never heard of, even in your childhood day.
Eagle Eye (Hollywood Movie 2008)
Synopsis extracted from fandango.com:
Shia LaBeouf and Michelle Monaghan star in Disturbia director D.J. Caruso's race-against-time thriller concerning two strangers thrust together by a mysterious telephone call, and their frantic efforts to discover why they have inexplicably become the nation's most wanted fugitives. Jerry Shaw (LaBeouf) and Rachel Holloman (Monaghan) were complete strangers at the beginning of the day, but that changed the instant a strange woman called to threaten both their lives and the lives of their loved ones. Suddenly forced into a series of increasingly dangerous situations, Jerry and Rachel must now take orders from a woman who's using everyday technology to track and control their every move. As the situation intensifies and the hapless duo are deemed the country's most wanted fugitives, they must work together in order to discover who it was that turned their lives upside down, and what they can do to thwart the criminal mastermind's cunning yet diabolical plan
Rating:7/10
Bonuses:1)Fantastic sci-fi action 2)well-thought plan with excellent coordination work.
The Mummy Tomb of The Dragon Emperor(Hollywood Movie 2008)
Synopsis extracted from imdb.com:
Centuries ago, the evil Emperor Han was cursed with his army by the sorceress Zi Juan and transformed into a mummy. In 1946, the explorer Rick O'Connell and his wife Evelyn O'Connell are invited by the British government to take the relic The Eye of Shangri-La to China. The ancient stone is capable to resurrect the Emperor Han and to point the way to Shangri-la and give eternal life to Han. When the couple reaches China, they meet their son Alex O'Connell, who has discovered the tomb of Han, and Evelyn's brother Jonathan Carnahan in his night-club. However, they are betrayed by their friend Prof. Roger Wilson, who is associated to General Yang that wants to serve Emperor Han. He resurrects the mummy and the guardian of the tomb and Zi's daughter Lin tells them that the only way to destroy Han is avoiding that he reaches Shangri-la and stabbing his heart with a dagger cursed by her mother. They travel to the Himalaya in the beginning of another adventure of Rick and his family.
Rating:6/10
Bonus:Fighting scenes.
Tony Del Piero wrote and posted at at 2:45 am
