A not Unminor problem

Peter K. peterk at enteract.com
Wed Apr 12 21:39:35 PDT 2000

>>To which I have to ask: if we did, I thought a major theme of Doug's book
>>is that financial markets aren't even efficient. Have I gotten something
>They're efficient in the sense of incorporating all available
>information (almost) instantaneously, which is practically a
>tautology. But the financial economist's sense of "efficient" has
>little to do with an ecologist's, engineer's, or anyone else's.

Here's a new article on finance theory, "convergence arbitrage," and the problems that Russia’s devaluation of the rouble and partial default on its rouble-denominated debt in '98 caused for Long Term Capital Management:


In it, the author writes, "As [LTCM's] difficulties grew, the Federal Reserve Bank feared the consequences for already nervous capital markets of a sudden forced liquidation of the fund’s large commitments, and therefore co-ordinated LTCM’s $3.6 billion recapitalisation by a consortium of American and European banks."

I wonder what would have happened had Big Government not meddled with the markets' efficient workings. This sort of thing is bound to happen again, no?


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