Wednesday, March 12, 2008

Alphabet Soup Intervention

Assiduous readers will recall that I pointed out a week ago that there was central banking sentiment to step into the ABCP/SIV/CDO/etc/etc mess by accepting that sort of nebulously-valued material in exchange for straight government debt. The big news yesterday was that there had been a concerted worldwide movement to do just that.

No word on just how the Fed, BoC, et al plan to value these 'securities'.

Regardless, the prevailing thought today was that this move was "treating the symptoms, not the problem", on the front page of today's Globe. Well, I think it certainly does a heck of a lot more than more monetary stimulus.

The question now is whether this liquidity plan is a substitute for interest rate cuts - I'm betting it is. Anyone else share a sentiment for only 25 basis points at the next Fed meeting?

Also, Princeton reject. This is not surprising. Ex-ante, I thought my profile was stronger than it was. Will be attending the Rochester flyout, though.

ADDENDUM: Why don't we observe more old people engaging in risky activities? Don't they have much less to lose, in terms of years of life? As I've aged, my preferences for running up the down escalator haven't diminished, but would my preferences for skydiving? Obviously many risky activities are physically-intense and bar participation from the elderly. Are there examples where physical capacity shouldn't be a factor and one could directly observe shifts in preferences? Is there something I'm missing?

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