Healthy markets require solid data based on reality.
It is hard enough to determine what, when and how to invest even with solid data. We live in an unpredictable and chaotic world, and the last thing that investors need is misinformation and distortions. That is why the LIBOR manipulation scandal is so infuriating; as banks skewed the figures, they skewed entire marketplaces. The level of economic distortion is incalculable — as LIBOR is used to price hundreds of trillions of assets, the effects cascaded across the entire financial system and the wider world. An unquantifiable number of good trades were made bad, and vice verse. Yet in truth we should not expect anything else from a self-reported system like LIBOR. Without real checks and balances to make sure that the data is sturdy, data should be treated as completely unreliable.
Unsurprisingly, it is emerging that many more self-reported figures may have been skewed by self-reporting bullshittery.
The Telegraph noted:
The Libor scandal could be repeated in a number of other “self-certifying” markets where prices are determined, he said
“Self-certification is clearly open to abuse, so this could occur elsewhere,” he said.
A Financial Services Authority inquiry into Libor should be extended to other self-certifying markets, he said. The Treasury said last night that the review, led by Martin Wheatley, was free to examine markets other than Libor.
An expansion of the FSA review could take in a number of other interest-rate-related data as well as some complex financial instruments measuring the difference between banks’ borrowing costs and that of the US government.[i.e. the Ted spread]. Some markets in gold and oil are also based on self-certification.
This all reminds me of this:
When humans have an incentive to exaggerate or lie — either to bolster their ego by lying about penis size, or to cream an easy profit by rigging rates — it seems they have a propensity to do so.
Hopefully there will be one beneficial side-effect of the LIBOR rigging — self-reporting will die. It seems inevitable that market participants will pay a premium for solid, independent data. But sadly, any auditor can be bribed. And in a generation’s time, the LIBOR-rigging scandal of 2008 (and probably much earlier) may just be an antique detail known to only a savvy few. Scepticism, caution and portfolio robustification will always remain essential tools for savvy investors who don’t want to lose their shirt and shoes.
It was scepticism that was the difference between economists who refused to buy into the notion of Soviet prosperity in spite of impressive (and entirely self-reported) figures emerging from the Soviet Union, and those Western economists like Paul Samuelson (perhaps spurred on by ideological fervour) who predicted again and again in textbooks spanning thirty years that the USSR would overtake the USA in GDP:
Alex Tabarrok notes:
In the 1961 edition of his famous textbook of economic principles, Paul Samuelson wrote that GNP in the Soviet Union was about half that in the United States but the Soviet Union was growing faster. As a result, one could comfortably forecast that Soviet GNP would exceed that of the United States by as early as 1984 or perhaps by as late as 1997 and in any event Soviet GNP would greatly catch-up to U.S. GNP. A poor forecast — but it gets worse because in subsequent editions Samuelson presented the same analysis again and again except the overtaking time was always pushed further into the future so by 1980 the dates were 2002 to 2012. In subsequent editions, Samuelson provided no acknowledgment of his past failure to predict and little commentary beyond remarks about “bad weather” in the Soviet Union.
The reason for his prediction? Apparently, bad data.
“No incentive to amend data to show strong Russian proletarian outperforms weak American capitalist, Comrade!”
Matthew Ashton writes:
To his credit Samuelson was always fairly open about it when his predictions failed to come true, stating that he was using the best data available at the time and he changed his mind as the evidence changed. I’d argue that in some cases, especially concerning evidence coming out of the Soviet Union, he possibly should have been a bit more sceptical as to its accuracy, however almost everyone in economics is guilty of that.
One can only wonder how bad the state of misreporting, fraud and delusion is in the various economies where central planning plays an even larger role than here in the West.
azizonomics 
If the Chinese Government issued SINO TREASURIES at 6.5%, don’t you think investors will stampede out of US treasuries and into these bonds?
Manipulated data means nothing. Every statistics bureau does it.
Kiss the USD goodbye.
December 2012.
Now I am putting my economic balls on the line 🙂
P.S.
Aziz, I bet you get millions of hits from China.
Well done!
Well if the Chinese Great Firewall allows their people to get here.
Zero hedge posted this.
Click to access Trade-Off1.pdf
It is a little early. When we see this discussed in the mainstream news, we will be close to systemic collapse.
Mainstream news: In the USA, “mainstream” “news” is dominated by support for Obama and the Dems., including and especially the blatant lies (and half-truths). This shapes the reporting (and voter delusion) of recovery — a repeat of the posted USSR (and Cuba).
Attaboys to AZIZ! “Figures don’t lie, but liars do figure”.
RE Samuelson: I now understand why the “Investor’s Business Daily” (with excellent coverage of public policy as well as investments) occasionally runs Samuelson’s syndicated column as their daily “ON THE LEFT” feature. But these current columns are quite honest and usually free of bias, UNlike the “NY Times”, “Washington Post”, and other “mainstream” columnists and media.
I am convinced that the only solid investment in our troubled time is gold and silver bullion. I can’t give you the exact date when your gold coins are going to be worth more than they are today, but I believe that the state of the US economy, and the state of the world economy for that matter, is so out of whack that the price of gold has no choice but to go higher because there’s no plan in place to straighten out this mess so the US dollar is going to continue to fall. A great place to buy your bullion is http://www.extremebullion.com to safeguard your investment. The prices are reasonable and the service is good.
Gold is a good investment in barbarous times.
Power has direct relationship to lying, fraud, manipulation, stealing, and all the rest. Everybody knows that this goes on. People just pretend that everything is OK. It’s called, “being an adult.”
I am not sure why everybody is so worried about the collapse of [whatever]. All systems are born, and all systems die. It’s like our own death, people are in the greatest denial about the only thing they know for sure.
Let’s allow this system to morph into the great beyond and move on to the next.
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Pingback: Penis Length… LIBOR and Soviet Growth
Interesting to see who are the greatest cheaters regarding p. length 😉
Black Latino Caucasian East Asian
Absolute Diff. 1.0 1.2 1.7 1.4
% of Measured 14.5% 18.5% 27.9% 26.4%
Who would have believed that Caucasians are the biggest cheaters doing a “quantitative easing” of 27.9% relative to measured p. length.
The KKK would not like this study.
As this study is demonstrating, self reporting is leading to exaggerated results. Especially if you aren’t well endowed.
So if you cannot trust in self reported p. length data from folks who are somewhat “short”, can you trust in self reported COMEX vault data reported by folks who are shorting gold and silver?
Pants down J.P. Morgan. We want to see your inventory.
Pingback: Penis Length, LIBOR & Soviet Growth « Financial Survival Network
Aziz,
You know I’m a fan, so don’t take this the wrong way.
The rigging of LIBOR is the non-story of the century. Take a look at the charts:
https://www.google.com/search?hl=en&q=libor%20fred&psj=1&bav=on.2,or.r_gc.r_pw.r_qf.,cf.osb&biw=1366&bih=661&wrapid=tlif134246694225310&um=1&ie=UTF-8&tbm=isch&source=og&sa=N&tab=wi&ei=nmsEULKZDajM6wHk3pjXBg
Right smack in the middle of the biggest financial crisis in 70 years, LIBOR goes totally limp. It’s so obvious, I never thought it was even worth discussing. Everybody knew, right?
The story is why, all of a sudden, are people concerning themselves with something so obvious?
Honestly, I don’t know, but I think it has something to do with the more than $500 trillion notional in interest rate derivatives.
Click to access dt1920a.pdf
What might (and I’ll re-emphasize the word “might”) be going on is that Wall Street’s grooming suckers. People willing to bet on rising rates in a variety of ways, so JPM & Co can rip their faces off. That lying sack ‘o shit Dimon said two weeks ago that JPM is positioned for rising rates. Me, whenever I hear a big bank CEO talk, I assume he’s lying (history’s on my side).
Anyway, it smells like a set-up to me.
To be honest, me too.
This posting greatly enhanced my self-esteem.
Caucasian, no doubt 😉
I thought so but it appears now that I may be black.
What would the Soviet Union look like if it had unfettered development? This is an interesting read
“History does not tell us what a Soviet Union, allowed to develop in a “normal” way of its own choosing, would look like today. We do know, however, the nature of a Soviet Union attacked in its cradle, raised alone in an extremely hostile world, and, when it managed to survive to adulthood, overrun by the Nazi war machine with the blessings of the Western powers. The resulting insecurities and fears have inevitably led to deformities of character not unlike that found in an individual raised in a similar life-threatening manner.”
http://killinghope.org/bblum6/Intro2004.htm
It is like a really good dream being interrupted by the nightmare of a home invasion by an aggressive intruder.
Exaggeration and lies are common across governments. More paragraphs:
“We didn’t know what was happening”, became a cliché used to ridicule those Germans who claimed ignorance of the events which took place under the Nazis. Yet, was their stock answer as far-fetched as we’d like to think? It is sobering to reflect that in our era of instant world-wide communications, the United States has, on many occasions, been able to mount a large- or small-scale military operation or undertake another, equally blatant, form of intervention without the American public being aware of it until years later, if ever. Often the only report of the event or of US involvement was a passing reference to the fact that a communist government had made certain charges — just the kind of “news” the American public has been well conditioned to dismiss out of hand, and the press not to follow up; as the German people were taught that reports from abroad of Nazi wrong-doings were no more than communist propaganda.
With few exceptions, the interventions never made the headlines or the evening TV news. With some, bits and pieces of the stories have popped up here and there, but rarely brought together to form a cohesive and enlightening whole; the fragments usually appear long after the fact, quietly buried within other stories, just as quietly forgotten, bursting into the foreground only when extraordinary circumstances have compelled it, such as the Iranians holding US embassy personnel and other Americans hostage in Teheran in 1979, which produced a rash of articles on the role played by the United States in the overthrow of the Iranian government in 1953. It was as if editors had been spurred into thinking: “Hey, just what did we do in Iran to make all those people hate us so?”
http://killinghope.org/bblum6/Intro2004.htm
BR, the Soviet Union was like having the most beautiful woman on the planet walk up to you, give you the most alluring smile possible, embrace you tenderly, and then stab you in the back.
Buddy. Your two posts of July 16 are, I think, the second time you have referenced killinghope.org. I skimmed through both. As an American very attentive to foreign affairs, starting as a schoolboy before WW II, my reactions include, but are not limited to:
1. The great preponderance of cited events and policy quotations are WW I vintage, which I cannot critique. But I am quite skeptical. What I DO know includes — pre-/during-/post-WW II, the Communist “party line” (unhesitatingly false/misleading as ordered from Moscow) was aggressively promoted through the “Agit-Prop” campaign of the Communist Party USA, and echoed by many dupes and idealists, including some within our government and a great many in entertainment and media. killinghope.org seems to parrot all of the Soviet propagsnda.
2. The Bolshevik regime was despotic from its “stealing” of the revolution. One proof of this was the rural “White Russian” people’s unsuccessful attempt to join with the German invaders as liberators.
3. The quotes of historian Winston Churchill (which may have been selective and/or out of context) did not include his 1947 +/- “Iron Curtain” speech which awakened the free/western world to the reality of cold war waged by the Soviet Union..
4. While the USSR military prowess was undoubtedly overestimated, by ambition, greed and judiciousness/safety-factor, the soviet Empire expanded enormously after WW II. You quote, “History does not tell us what a Soviet Union, allowed to develop in a ‘normal’ way of its own choosing, would look like today.” I say that history is quite clear that a ruthless power-seeking empire, unless thwarted by a superior culture and force, would dominate humanity, as Hitler attempted and as the Roman Empire imposed until it rotted from within after centuries.
i do not know who to believe but I agree with your point:
“2. The Bolshevik regime was despotic from its “stealing” of the revolution. One proof of this was the rural “White Russian” people’s unsuccessful attempt to join with the German invaders as liberators.”
My family followed this because the Communist were A holes and stole our family land we got given hundreds of years ago when the SERFS were free. They also banned churches. A no no to Ukrainians!
Thanks, Buddy, for posting the historical fact. If you run down the facts, I believe you will find that my other points (and many, many more crimes on the “rap sheet” of the USSR) are true.
http://Www.holodomorthemovie.com
Many millions of ukrainians starved by Stalin. That is why we celebrated when Hitler rolled into Ukraine.
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I am an Asian so I understand about the small penis size compared to black guys. However, the penis size is not everything you need to satisfy your lady. The mindset is the most important. If you have a 10-inche penis but it does not get up on demand, then it is not worth it. Most Asian men have short penis about 5’5 to 8 inches in erection. The most important part is the rock hard erection on demand.