Bunker Bear's take on recent economic and market instability. BB says that the instability is mostly due to government Meatheads jacking around with the dollar and with regulations, triggering the Chaos from Chaos Theory. He says that Chaos and irrational economic behavior make math models of the economy unreliable.
Bunker Bear is one of the Free Enterprise Cartoon Bears.
Made with Xtranormal State desktop app.
1) Predictably Unpredictable, The Hidden Forces that Shape Our Decisions by Dan Ariely, Harper 2009
2) What Are the Odds? Chance in Everyday Life by Mike Orkin, W. H. Freeman and Co., 2000
3) The Drunkard's Walk, How Randomness Rules Our Lives, by Leonard Mlodinow, Vintage Books, 2008
4) How We Know What Isn't So, The Fallibility of Human Reason in Everyday Life, by Thomas Gilovich, The Free Press, 1991
5) 7. Chaos Theory for Beginners
"The Uncertainty Principle prohibits accuracy. Therefore, the initial situation of a complex system can not be accurately determined, and the evolution of a complex system can therefore not be accurately predicted. "
6) About Chaos
"The only way to tackle this kind of problem is by a series of iterations—calculate the gravitational forces, let the objects move for a short time under these forces, then recalculate the forces based on the objects' new positions, etc. Even without a computer, Poincaré could see that the resulting orbits were aperiodic and wildly disordered. Moreover he discovered that a small change in the initial conditions—the initial positions and velocities of the three objects—produced a huge change in the orbits. This important observation was to lie fallow for eighty years, awaiting the development of chaos theory."
7) Lorenz Solver
[Java: select alt t button, and change a value]
8) Chaos Theory: A Brief Introduction
"An employee of IBM, Benoit Mandelbrot was a mathematician studying this self-similarity. One of the areas he was studying was cotton price fluctuations. No matter how the data on cotton prices was analyzed, the results did not fit the normal distribution."
9) Does God Play Dice (US Edition): The Mathematics of Chaos, by Neil Stewart, Wiley, 1991
10) The Soothsayers of Macroeconometrics 9-19-11
11) Bad Numbers or Could-Be-Better Data? 10-16-09
"In my current job," Krueger told NABE, "I have been constantly surprised at how little quantitative information can be brought to bear on fundamental policy questions...in part, this reflects... the fact that existing data are not useable or sufficiently detailed, or that relevant data simply do not exist."
12) From Bubble to Depression? 4-6-09
"If home-ownership costs were included in the CPI, inflation would have been 6.2% instead of 3.3%."
"With nominal interest rates around 6% and inflation around 6%, the real interest rate was near zero, so household borrowing took off. As measured by the Case-Shiller 10 city index, the accumulated inflation in home-ownership costs between January 1999 and June 2006 was 151%, but the CPI measured a mere 23% increase."
"As the Federal Reserve monitored inflation in the early part of this decade, home-price increases were no longer visible in the CPI, so the lax monetary policy continued. Even after the Fed began to slowly raise the fed-funds rate in May 2004, the average rate remained low and the bubble continued to inflate for two more years." (2)