Wednesday, May 30, 2012
The A Priori World Speaks 1st…
The Global Inference Mechanics of Natural Self-Judgment and Decision; or At Limit__Pure Self-Understanding…
“Two things here are all-important to assure oneself of
and to remember. The first is that a person is not absolutely
an individual. His thoughts are what he is "saying to himself,"
that is, is saying to that other self that is just coming into life in
the flow of time. When one reasons, it is that critical self that
one is trying to persuade; and all thought whatsoever is a sign,
and is mostly of the nature of language. The second thing to
remember is that the man's circle of society (however widely or
narrowly this phrase may be understood), is a sort of loosely
compacted person, in some respects of higher rank than
the person of an individual organism." Charles S. Peirce
“The elements of every concept enter into logical thought at the gate
of perception and make their exit at the gate of purposive action;
and whatever cannot show its passports at both those two gates
is to be arrested as unauthorized by reason.” C. S. Peirce
“It is the central insight of the theory of abduction that
there is no induction without a pre-existent hypothesis
which has been inferred or constructed abductively.” CP
9-25-45 to 2012
7th year member,
Camden Philosophical Society,
Material copyrighted ©,
Please contact author for use.
This paper represents an explanation of the deepest mental mechanics, so far attempted, in this author’s opinion, from his extensively researched overview, of all philosophical history. The most modern thinking philosophers have stated, that a full understanding of ‘abduction’ is present philosophy’s most urgent task. Though many papers have been set forth about this ‘deepest inner mechanics of the hypothesis’, in recent years, it is this author’s opinion, they all fall short of the entire truth necessary for full a priori grounding__in experience, world and rationality__where the ‘psychical logic’ of epistemology and phenomenology has not been thoroughly understood as having ‘independence of thought’, from the ‘psychological reasoning’ of our epistemologies__which has more prevailed over the last 100 years. Since the loss of Charles Sanders Peirce’s exceptional talents of helping the world understand the necessity of a ‘critical common-sense’ discrimination between psychological sense and logical sense__where and whence both are truly and fully needed, but within the scope of being within their proper places, interpretations and understandings of__it is certainly in this author’s opinion, now necessary to make amendments, which may further society’s abilities to possibly communicate more successfully__again. It is the concluding opinion of this paper’s entire thesis, that a properly understood__and full grounding of ideas__back into our innate experiential and natural rational natures, can re-accomplish and replenish what modern society so obviously has lost__and so desperately needs…
As you may have already surmised from the titles, quotes and abstract, much of what will follow will include a deep exploration of the historical, as well as personal and public differences between epistemology’s old philosophical arguments; and arguments, here meant in a good investigative sense, about the major historical differences between say, nominalism and realism, or more recently updated to cognitive psychological epistemology and inner states of memory and working memory__per say, and normative, nomological and logical epistemology and intellectual rationality, of inner and outer memory, and inner working memory states__along with the direct perception of both sides of these issues. Of course this paper includes far wider and deeper descriptions by also stating the positives and negatives of metaphysics and ontology, as well as the major historical differences between nominalism, noumenalism, epiphenomenalism, and phenomenalism, etc.__where even the ‘Scholastic’ era’s theology enters our historical experiences, as the bearers of these experiences of all kinds, and even logic, science and maths, from the ancient worlds to the modern__as they played an extremely important part, in any of our knowledge advancements being what they are...
It is only fair to state the author’s philosophical position as an experiential, phenomenal realist__with the caveat that he has full knowledge of the necessity of general psychology’s great gift, to positively-rhetorically relay the information any more exacting scientific mind may think, write about and want to persuade his neighbors of such merits__as may be discovered by his more exacting scientific methods. The text will explain how a more eclectic experiential-rational esthetic rhetoric may be developed and used to bridge the many gaps known to presently exist between say; ‘The Continental Schools’, ‘The Analytic Schools’, ‘The Pragmatic Schools’, ‘The Critical Theory Schools’ and ‘The Theistic Schools’ of thoughts and ill-functioning communications…
The author may further mention, he pays a great tribute, not only to Charles Sanders Peirce, but to all history’s greatest minds, and not only the philosophers, but the exact scientists, physicists, psychologists and psychiatrists, mathematicians, historians, economists and especially all the world’s greatest logicians and rhetoricians__as logic is the main field of this author’s, and his many students’ choices of study, for over some forty years of professional life. Just a few should maybe be mentioned__the ones, or at the least__a few of the ones influencing this pen the most; Some of the world’s ‘best’ universal/international, aggregate logical minds this author owes a great debt to may just be__Heraclitus, Pythagoras, Eudoxus, Socrates, Plato, Aristotle, Euclid, Archimedes, Cicero, Seneca, Boethius, Al-Biruni, Ibn Sina, Albertus Magnus, Duns Scotus, William of Ockham, Jean Buridan, Nicholas De Cusa, Juan Vives, John Wallis, Francis Bacon, Giordano Bruno, Galileo Galilei, Johannes Kepler, Robert Boyle, Baruch Spinoza, Christiaan Huygens, Hugo Grotius, John Locke, Isaac Newton, Gottfried Leibnitz, Thomas Reid, Alexander Baumgarten, Immanuel Kant, George Washington, John Marshall, Alexander Hamilton, Giambattista Vico, Bernard Bolzano, Tom Paine, Évariste Galois, William Whewell, Auguste Comte, J.C. Bose, S.W. Hamilton, W.R. Hamilton, George Boole, Augustus De Morgan, William K. Clifford, Alexander Bain, R.H. Lotze, Charles S. Peirce, William Minto, Mark Twain, Christine Ladd-Franklin, Werner Heisenberg, Paul Dirac, Max H. Fisch, S.N. Bose, Jan Lukasiewicz, J.M. Keynes, Arthur Prior, Kurt GÖdel, Mikhail Bakhtin, Clarence Lewis, Alfred Tarski, John Wheeler, Joseph Ransdell, Roderick Chisholm, Nathan Houser, Patrick Coppock, Phyllis Chiasson, Herbert Feigl, Hans Jonas, Peter McLaughlin, Nicholas Rescher, Jay Zeman, James R. Wible, John Sowa, K.O. Apel, Irving Anellis, Sami Paavola, T.L. Short, Joseph Brent, Fernando Zalamea, Ahti Pietarinen, Susan Haack, Albert Casullo, Joseph L. Esposito, Theodora Achourioti, and Igor Naletov, Daniel Andler, etc…(just a short list) As you may have noticed, some listed are not of Peirce’s choices, but this author has his reasons__and no slight is meant to the many other great minds of history, not mentioned…
Friday, May 4, 2012
Author: Satyajit Das
Recent hopes have relied on the ostensible success of the European Central Bank’s (“ECB”) LTRO – Long Term Refinancing Operation, more appropriately termed the Lourdes Treatment and Resuscitation Option. In December 2011 and February 2012, the ECB offered unlimited financing to European banks at 1% for 3 years replacing a previous 13-month program. Banks drew over Euro 1 trillion under the facility – Euro 489 billion in the first round and Euro 529.5 billion in the second. Participation amongst European banks was widespread, especially in the second round where around 800 banks used the facility.
The funds borrowed were used to purchase government bonds, retire or repay existing more expensive borrowings and surplus funds were redeposited with the ECB. The first entailed banks borrowing at 1% purchasing higher yielding sovereign debt, such as Spanish and Italian bonds that paid 5-6%. This allowed banks to earn profits from an officially sanctioned carry trade – known as the Sarko trade after the French President.
The LTRO provided finance for both beleaguered sovereigns and banks, which need to raise around Euro 1.9 trillion in 2012. It helped reduce interest rates for countries like Spain and Italy. It also helped banks covertly build-up capital, via the profits earned through the spread between the cost of ECB borrowings and the return available on sovereign bonds.
The LTRO was very clever, effectively monetising debt (printing money) without breaching European Treaties or the ECB’s charter.
The sheer weight of money – at one Euro 500 note per second it would take 63 ½ years to count Euro 1 trillion- proved successful. Financial market sentiment was overwhelmingly positive feeding a large rally in global stock markets and other risky assets.
As subsequent events have exposed, there were always reasons to be cautious.
The LTRO facility is for 3 years. It assumes that the conditions will normalise within that period. It is not clear what happens if that is not the case.
Economist Walter Bagehot advised that in a crisis central banks should lend freely but at a penalty rate and secured by good collateral. The ECB does not appear to have quite understood Bagehot’s commandment. The rate is below market rates, amounting to a subsidy to banks. The ECB and Euro-Zone central banks have loosened standards, agreeing to lend against all manner of collateral. In effect, the ECB is now functioning as a financial institution, assuming significant credit and interest rate risks on its loans.
If the European Financial Stability Fund (“EFSF”) was a Collateralised Debt Obligation, the ECB increasingly resembles a highly leveraged bank.
The ECB balance sheet is now around Euro 3 trillion, an increase of about 30 percent just since Mario Draghi took office in November 2012. It is supported by its own capital (scheduled to increase to Euro 10 billion) and the capital of Euro-Zone central banks (Euro 80 billion). This equates to a leverage of around 38 times.
Critically, the LTRO cannot address fundamental issues.
It does not reduce the level of debt in problem countries, merely finances them in the short-run. Europe is relying on its austerity program to reduce debt. As Greece demonstrated and Ireland, Portugal, Spain and Italy are demonstrating, massive fiscal tightening when combined with private sector reduction in debt merely puts the economy into recession. As public finances deteriorate rather than improve, it results in an increase not decrease in public debt.
Ultimately, it may be necessary to go Greek. Debt restructuring may be needed to achieve the required reduction in the public borrowings for many countries. Interestingly, financial markets price the risk of a Spanish debt restructuring at around 30-35%.
The LTRO does not improve the cost or availability of funding for the relevant countries beyond an immediate short term fix.
Government bond purchases financed by the LTRO artificially decreased the interest rates for countries, such as Spain and Italy. Unless additional rounds of LTRO are offered, interest rates are likely to return to market levels.
The real increase in liquidity available to support sovereign borrowings was lower than Euro 1 trillion. Perhaps only one third of the LTRO loans and maybe as little as Euro 115 billion were directed to this purpose. Banks used the bulk of funds to repay their own borrowings. As debt becomes due for repayment through the year, banks may need to sell sovereign bonds purchased with the funds drawn under the LTRO. Unless market conditions normalise and banks regain access to normal funding quickly, this will place increasing pressure on sovereign funding and its cost.
With European countries facing heavy refinancing programs in 2012 and beyond, the ability to raise funds at reasonable rates remains important. Existing bailout programs assume countries like Portugal and Ireland will be able to resume financing in money markets normally from 2013.
Events complicate the ongoing commercial financing of European banks and sovereigns. The need for collateral to support ECB funding makes other investors de facto subordinated lenders reducing their willingness to lend or increasing the cost. In the Greek restructuring, European Central Banks and official institutions were exempted by retrospective legislation from loss while other investors suffered 75% writedowns. This has reduced investor willingness to finance countries considered troubled.
European banks already have large exposures to sovereign debt, which has increased since the start of the LTRO. Spanish banks are thought to have purchased around Euro 90 billion, a jump of around 26% to Euro 220 billion. Italian banks are thought to have purchased Euro 50 billion, a jump of 31% to Euro 270 billion. A similar rise in government bond holdings has occurred in Portugal and Ireland. As interest rates on these bonds have increased, buyers now have large unrealised mark-to-market losses on these holdings.
As with the sovereigns, the LTRO does not solve the longer term problems of the solvency or funding of the banks, which now remain heavily dependent on the largesse of the central banks. It is a government sponsored Ponzi scheme where weak banks are supporting weak sovereigns who in turn are standing behind the banks – a process which can be best described as two drowning people clinging to each other for mutual support.
The LTRO has not materially increased the supply of credit to individuals and businesses. The money is being used by banks to finance themselves as they reduce borrowings by selling off assets to reduce dependence on volatile funding markets. The LTRO does little to promote desperately needed economic growth in the Euro-Zone.
The initial euphoria faded as a number of concerns re-emerged, manifesting themselves in the form of increasing rates on Spanish and Italian debt which now hover around the key level of 6.00% per annum.
Increasingly poor economic growth figures from Europe pointed to a lack of growth and progress on debt reduction.
Attempts to reduce Spain’s deficit has proved problematic. Both Spain and Italy have deferred balancing their budget in the face of a deteriorating economic outlook. It is unclear which markets fear most -Spain and Italy not achieving its targets through savage spending cuts resulting in higher debt or achieving its target putting their economies into an even deeper recession and increasing debt.
The difficulties faced by both Spanish Prime Minister Mariano Rajoy and Italian Prime Minister Mario Monti in implementing labour reforms have highlighted the resistance to structural change. Increasing protests in many countries point to the political difficulty in implementing the agreed austerity measures.
The problems of the banking system have resurfaced. Spanish banks’ bad and doubtful debts have increased, as the Iberian property bubble deflates.
Increased reliance by Spanish and Italian banks on financing from central banks has heightened concern. Spanish bank borrowings from the ECB increased to over Euro 300 billion in March from Euro 170 billion in February. Lending to Spanish banks now accounts for nearly 30% of total ECB lending. Italian banks have also been heavy borrowers, a reminder of the linkage between banks and their sovereigns.
Reluctance to increase the inadequate European firewall sufficiently to deal with potential problems means policy options are limited. At around Euro 500 billion in available funds, the bailout fund is short of the Euro 1 trillion sought by the International Monetary Fund and G-20 or Euro 2-3 trillion thought necessary by financial markets. German leaders have repeated their unwillingness to increase the fund to the necessary size, arguing, probably correctly, that no firewall will be adequate.
Poorly judged and ill-timed comments by ECB President Draghi about the absence of need for further LTRO funding and planning for an exit drew attention to the fragility of the position and ongoing risks. The comments were driven by Bundesbank’s unease at the ECB’s policy. The market reaction forced Mario Draghi to retract comments about an early exit from emergency funding. As rates continue to rise, Benoit Coeure, the French ECB board member, promoted a new round of direct purchases of Spanish bonds to reduce yields.
The failure of the LTRO to decisively solve European problems is unsurprising. Confidential analyses prepared by European Union officials and distributed to ministers meeting at the Copenhagen meeting in March 2012 concluded that the Euro 1 trillion in loans was a “reprieve”, rather than a solution.
Rather than take the time afforded to move on other fronts, European leaders reverted to type. Spanish Finance Minister Luis de Guindos opined that: “We are convinced that Spain will no longer be a problem, especially for the Spanish, but also for the European Union”. It was eerily reminiscent of his predecessor Elena Salgado who almost exactly one year earlier on 11 April 2011 said: “I do not see any risk of contagion. We are totally out of this”. The optimism was echoed by French President Nicolas Sarkozy who was confident that the Euro-Zone had “turned the page”. Italian Prime Minster Mario Monti stated that the “financial aspect” of the crisis had ended.
The European debt crisis is not over. Fundamental problems – debt levels, trade imbalances, problems of the banking sectors, required structural reforms, employment and economic growth – remain.
Beyond the German favoured remedy of asphyxiating austerity to either cure or kill the patient, Europe is rapidly running out of ideas and time to deal with the issues. As the real economy stalls and debt problems continue, the most likely policy actions may come from the ECB – an interest rate cut to near zero and further liquidity support, perhaps even full-scale quantitative easing. Bailout funds may be channelled to recapitalise Spanish banks, as a means of helping Spain without resort to a full-blown bailout package.
It is doubtful whether any of these steps will work.
European politicians and citizens want a quick return to a period Spaniards now refer to as cuando pensábamos que éramos ricos which translates to “when we thought we were rich”. Official policies and action are focused on deferring rather than dealing with the problem. Unfortunately, that means the inevitability of meeting the same problem somewhere down the road.
John Maynard Keynes observed in The Economic Consequences of the Peace that each action designed to bring closure to one crisis sows the seeds of greater economic, political and social problems. Europe is living the truth of that statement one day at a time.