## Sunday, August 18, 2013

### YES! You can understand economics

I was looking at my on-line credit card statement today.  I am spending money way too fast.  Some things are going to have to change around here.

### Mortgage backed securities and Credit Default Swaps explained

I figured that if these methods were good enough for the brightest minds from our elite, Ivy League schools then they are good enough for me.  I don't have a bunch of paper so I will have to make do with what I have laying around.

 Big wheel weights, little wheel weights.  Battery posts.  The curlicue in the lower left is from a "Sanitary" drain.  I am sure there is something symbolic about the curlicue.
There is a statistical concept known as Regression-to-the-mean.  Risk/variation/uncertainty can never be eliminated but it can be diluted.  Increasing the sample size decreases the per-unit variation.  If the population being sampled does not change, then quadrupling the sample size reduces the normalized variation by half.

 It does not matter.  Into the pot they go

 I could not find my normal molds but I am in a hurry.  I will invent a venue as I go because I am losing money waiting.

 Looking good.

 The clips, nuts, cut wires and general dirt are called Dross.
Unfortunately, many bowed to the temptation to juice up their profits by changing the population during the mortgage bundling mania.  It was the financial version of the Tragedy of the Commons.

 Can't let that go to waste.  We invested money processing them.  We will wrap good material around them.

 Almost ready to pour.
 Money cookies

 I am going to have to do a little bit of math here. 19.3 g/cc X 63.4cct X \$48.59/g X 12 money cookies.  That works out to \$713,470  cct=cubic centimeters theoretical.  It is based on max diameter of the cupcake tin depressions (68mm) and the thickness of a 'random' cookie (18mm).
Now, all I need to do is buy a can of Gold spray paint, list Golden Bars on eBay.  I will insure them with Credit Default Swaps by offering to replace-with-similar from a different smelter if the buyer finds anything wrong with them.  Trust me, I have a Ph.D

### WHAT COULD GO WRONG?

#### 3 comments:

1. You need to add the word "commenerative" to the money cookie and charge "collectors" twice as much as its value.

2. So, now, can you explain derivatives?

3. Hello Brigid and meema:

Thanks for posting.

Regarding "commemerative": The guys at the grain elevator also tell me that putting the picture of a horse on anything doubles the price. Being a standard-issue guy, I am color blind to issues of good taste and appropriateness. Is it acceptable to mix metaphors and put a picture of "High-Ho Silver" on a Golden ingot?

As you may have guessed, these (currently) silvery ingots are heading to the Lee melting pot. They will probably and be cast into 148 grain, silvery cylinders with a diameter of 0.358 inches.

Regarding derivatives: I will mull that over. I get joy out of being able to explain things in graphic, memorable ways. I am currently at a loss for a way to make derivatives visual. But I promise to chew on the idea. Maybe something will pop out.

Readers who are willing to comment make this a better blog. Civil dialog is a valuable thing.