Re: [tlug] Open-source Japan

[Edward Middleton <emiddleton@example.com>]

Stephen J. Turnbull wrote:
> Curt Sampson writes:
>
>  > This is essentially an argument for regulation.
>
> Sure.  The market that economists analyze is an abstraction; it
> doesn't exist by itself in the real world.  For example, the issue of
> "announcing a price is a commitment to trade at that price".  All the
> theorems depend on that.  But to make that stick in the real world,
> there *must* be regulation.  Essentially, by definition.  (This is
> perfectly analogous to implementation of ADTs in a real language, I
> think.)
>
> The question is, does that need to be done by an external agency (==
> government or industry cooperative), or can the market be left "free"
> to do it itself?  As you say, the NYSE does a lot of self-regulation
> and is very successful because of it.  In general, the global
> financial markets self-regulate and mostly nobody is the worse for it.
>
> It's at the level of personal credit, insurance, etc that problems
> come in.
>   

Were do you see AIG[1] fitting into this?  My understanding[2] was that
they were offering what is effectively (but presumably not legally) an
insurance instruments CDS[3], through a banking unit as a way to avoid
capital requirements and stringent risk assessments imposed on insurance
agencies.

Edward

1 http://en.wikipedia.org/wiki/American_International_Group
2. I could be wrong ;)
3. http://en.wikipedia.org/wiki/Credit_default_swap