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By Shalom P. Hamou (about the author)
Become a Fan -- Page 9 of 11 page(s)
Chairman Alan Greenspan
Testimony at the House Oversight and Government Reform Committee.
Answering a Question from Representative Henry A. Waxman.
October 23rd, 2008.
A discontinuous twist of the yield curve changes in a chaotic way the Market value of long-term assets.
"Our day-by-day experiences with the effectiveness of flexible markets as they adjust to, and correct,
imbalances can readily lead us to the conclusion that once markets are purged of rigidities,
macroeconomic disturbances will become an historical relic.
However, the penchant of humans for quirky, often irrational,
behavior gets in the way of this conclusion.
A discontinuity in valuation judgment, often the cause or consequence of a building and bursting of a bubble,
can occasionally destabilize even the most liquid and flexible of markets.
I do not have much to add on this issue except to reiterate our need to better understand it."
Chairman Alan Greenspan
Globalization and Innovation.
At the Conference on Bank Structure and Competition,
Sponsored by the Federal Reserve Bank of Chicago, Chicago, Illinois.
(via satellite)
May 6th, 2004
Low Risk Premia:
This inverted yield curve is due to a clear underpricing of the risk premia.
A "random shock" will cause an onset of investor caution, increasing these risk premia to they fair value.
It will normalize discontinuously the yield curve.
It will create a chaotic behavior of credit Markets.
"Thus, this vast increase in the market value of asset claims is in part
the indirect result of investors accepting lower compensation for risk.
Such an increase in market value is too often viewed by
market participants as structural and permanent.
To some extent, those higher values may be reflecting the increased
flexibility and resilience of our economy.
But what they perceive as newly abundant liquidity can readily disappear.
Any onset of increased investor caution elevates risk premiums and, as a consequence,
lowers asset values and promotes the liquidation of the debt that supported higher asset prices.
This is the reason that history has not dealt kindly with
the aftermath of protracted periods of low risk premiums."
Chairman Alan Greenspan
Reflections on Central Banking.
At a Symposium sponsored by the Federal Reserve Bank of Kansas City,
Jackson Hole, Wyoming,
August 26th, 2005
Get Up and Dance, Twist ... and Shout.
The Crash, a twist of the yield curve, is a more realistic assessment of the risk/return of long term assets.
Become a Fan -- Page 9 of 11 page(s)
Testimony at the House Oversight and Government Reform Committee.
Answering a Question from Representative Henry A. Waxman.
October 23rd, 2008.
A discontinuous twist of the yield curve changes in a chaotic way the Market value of long-term assets.
"Our day-by-day experiences with the effectiveness of flexible markets as they adjust to, and correct,
imbalances can readily lead us to the conclusion that once markets are purged of rigidities,
macroeconomic disturbances will become an historical relic.
However, the penchant of humans for quirky, often irrational,
behavior gets in the way of this conclusion.
A discontinuity in valuation judgment, often the cause or consequence of a building and bursting of a bubble,
can occasionally destabilize even the most liquid and flexible of markets.
I do not have much to add on this issue except to reiterate our need to better understand it."
Chairman Alan Greenspan
Globalization and Innovation.
At the Conference on Bank Structure and Competition,
Sponsored by the Federal Reserve Bank of Chicago, Chicago, Illinois.
(via satellite)
May 6th, 2004
Low Risk Premia:
This inverted yield curve is due to a clear underpricing of the risk premia.
A "random shock" will cause an onset of investor caution, increasing these risk premia to they fair value.
It will normalize discontinuously the yield curve.
It will create a chaotic behavior of credit Markets.
"Thus, this vast increase in the market value of asset claims is in part
the indirect result of investors accepting lower compensation for risk.
Such an increase in market value is too often viewed by
market participants as structural and permanent.
To some extent, those higher values may be reflecting the increased
flexibility and resilience of our economy.
But what they perceive as newly abundant liquidity can readily disappear.
Any onset of increased investor caution elevates risk premiums and, as a consequence,
lowers asset values and promotes the liquidation of the debt that supported higher asset prices.
This is the reason that history has not dealt kindly with
the aftermath of protracted periods of low risk premiums."
Chairman Alan Greenspan
Reflections on Central Banking.
At a Symposium sponsored by the Federal Reserve Bank of Kansas City,
Jackson Hole, Wyoming,
August 26th, 2005
Get Up and Dance, Twist ... and Shout.
The Crash, a twist of the yield curve, is a more realistic assessment of the risk/return of long term assets.
Take action -- click here to contact your local newspaper or congress people:
What If you Called 411 and The Crash Answered?
Click here to see the most recent messages sent to congressional reps and local newspapers
blog.yield-curve.net
Shalom P. Hamou
Tel Aviv, Ramat Aviv, Israel
I am the youngest economist at My Yield Curve.
Since spring of 1994 I have been working on economic depressions.
I am writing The Tract The Religious Interpretation of (more...)
The views expressed in this article are the sole responsibility of the author
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