Why bank regulators not disclosing the criteria for evaluating “living wills” causes more systemic financial risk
Enforcement efforts on two interest-rate manipulation fiascos
Here is how you get caught for trading on inside information
6/10 – Francine McKenna at MarketWatch – How NASDAQ watches for insider trading – Deep background on how NASDAQ monitors all the trading in the market for suspicious activity. They have a variety of tools and techniques to identify anomalies and drill down to eventually reach the individual trades.
Tools used by heavy equipment operators. Photo courtesy of Adobe Stock.
The description of how much a drachma or Athenian Talent is worth is best considered by converting it to how many days labor could be purchased. Determining the silver content and converting that weight of silver to current dollars based on current silver values produces nonsensical answers. So I will try to adjust from a day’s wage 2000 years ago to a day’s wage today.
How to do that? Here is my feeble effort.
By the way, this post is one part of my learning about ancient finances.
The data for Construction and Extraction Occupations category contains a reasonable frame of reference for skilled workers. The BLS data is organized into ‘detail’ categories with a few of those detail level job classifications rolled into a ‘broad’ subtotal, with a group of broad categories rolled into a ‘minor’ and those rolled up into a ‘major’ category.
Construction and Extraction Occupations is a broad category. Construction Trade workers in a minor category. Brickmasons, Blockmasons, and Stonemasons and Construction Equipment Operators within that grouping are broad categories. Carpenters are a detail category.
Why was he fired? He merely cost the bank €4.9B back in 2008 after they unwound his unauthorized trades. That is only $5,530,000,000 at today’s exchange rate.
Would you trade your place in life today for life occupying the Gould-Guggenheim mansion when it was completed in 1912? Even if a billion dollars was tossed in to sweeten the swap? I would not make the trade. Photo by Adobe Stock.
I suggest you are in fact richer today than John Rockefeller was 100 years ago. If it were possible for Prof. Don Boudreaux to switch places with John Rockefeller’s life and even if he could have a billion dollars after he arrived back in 1916, he would not make the switch. He would rather live as a comfortable professor today than be a billionaire 100 years ago.
I agree.
Here are three posts to explain this strange idea: first, what life was like 100 years ago, why Prof Boudreaux would not make the switch, and then why Coyote Blog wouldn’t either.
(This post may seem to be out-of-place on my blog discussing accounting and auditing topics. This discussion is part of my enjoyable research on ancient finances and a related thread of how much life has improved over the last 200 years. Since I discuss finance at this blog, it actually fits.)
I will update a few of the stats in the Atlantic article where the author took a shortcut. When I browsed through the BLS report, I noticed some sentences which were repeated nearly verbatim in the article, which is okay since the report is a public document.
A few highlights:
Workers in factories averaged 55 hours a week. The fatality rate across the economy was 61 deaths per 100,000 compared to about 3.3 per 100,000 today.
What does that tetradrachm, from the era of Alexander the Great, representing pay for two days of a skilled construction worker, represent today? Image courtesy Adobe Stock.
The following numbers are based on purchasing power parity, which is a tool economists use to compare countries across currencies and across time.
Average income across the planet is now $33 a day, which is also about equal to average income in Brazil today or in the US back in 1941.
Income in places like the US and Sweden are 3 or 4 times the planet average.
Average income per person was about $3 a day from about 1800 all the way back until humans first appeared on the planet. Dr. McCloskey says daily income sometimes in some places rose to $6 or $8 for a while but slipped back to the $3 range.
For illustration of what $3 per day looks like, consider Haiti or Afghanistan. In those two places, the current PPP income is $3.
So where does that leave us for a comparison? Consider this purchasing power parity analysis.
$3 – For all of history until about 1800 average daily income was about $3.
$33 – Today average income is about $33 in Brazil or a worldwide average.
$132 – Today average income in the US and Sweden is 3 or 4 times higher than the world average. The specific days point is $132 a day in the US in 2011.
Going from $3 to $132 is an increase by a factor of 44.
As a general concept these ideas apply to every business and charity. Getting ready in advance of a media firestorm will improve your chances of surviving the onslaught.
A view of economic progress. Ponder the productivity improvement and resulting increase in wealth to go from this:
Image courtesy of DollarPhotoClub.com
To this:
Image courtesy of Adobe Stock.
The overall standard of living has increased by a factor of somewhere between 30 and 100 in the last 200 years.
The little side trip in this post and the next will lead me back to my discussion of ancient finances in general and Alexander’s haul from his military campaigns in particular.
..in the two centuries after 1800 the trade-tested goods and services available to the average person in Sweden or Taiwan rose by a factor of 30 or 100. Not 100 percent, understand— a mere doubling— but in its highest estimate a factor of 100, nearly 10,000 percent, and at least a factor of 30, or 2,900 percent. The Great Enrichment of the past two centuries has dwarfed any of the previous and temporary enrichments.
Let me phrase that another way. The value of what is enjoyed today by an average person is roughly equal to what 30 or 100 people had two centuries ago. That means the constant dollar value of what is consumed and enjoyed has grown by a factor of somewhere between 30 and 100.
I was on active duty in the U.S. Air Force a mere four years. I never got within 3,000 miles of hostile action against American forces. To top it off, my small contribution was decades ago.
As a result, I am squeamishly uncomfortable accepting the appreciation when someone tells me “Thanks for your service.”
It took me a few years to get to a place where I could accept those comments.
I now graciously and proudly accept those expressions of appreciation from my fellow Americans, not because of what I did so long ago, but on behalf of all those soldiers, sailors, marines, and airmen who do not have someone looking them in the eye, shaking their hand, and saying “thanks.”
So for all those troops pulling alerts, standing watch, scheduling logistics, or taking fire, please know that vast numbers of Americans are grateful for your service.
I pass on to you their thanks.
You are there, not here, so many people have thanked me instead. It is you they are really thanking.
While today we remember with gratitude those who did not return, I hope those who are serving today hear the appreciation.
Image courtesy of DollarPhotoClub.com before they merged into Adobe Stock.
In about three years there will be a complete overhaul of the accounting rules for leases.
For a quick introduction to the changes, here are a few of the comments in a recent AICPA webinar. I will keep this nontechnical.
(Discussion cross-posted from my other blog, Nonprofit Update, because this discussion will be a good intro for CPAs.)
“Right of use” asset
The basic concept is that a lease contract gives you the right to control the use of property, equipment, office space, or some other identified asset for a specific period of time. The economic substance is that the asset is yours to use for the term of the lease.
By creating a “right of use”, the lease contract gives you an asset that needs to be reflected on the balance sheet. In addition the liability for future payments needs to be recognized.
A hurdle that keeps popping up when the U.S. or other governments take a banker to trial is being able to prove the case in court. Now the pesky issue is surfacing of having a case survive on appeal.
A few articles that have caught my eye on varied aspects of the overall range of banking fiascos in play:
4/14 – New York Times – How Regulators Mess With Bankers’ Minds, and Why That’s Good – News the previous week was that many of the huge banks failed their ‘living will’ test. Each bank that is labeled as having ‘systemic risk’ must submit for approval a plan on how they would wind down in the event of failure. The purpose is to show they would not take down the entire financial system.
This article points out the banks were not told what their living will should contain or what it should look like.
As an expected result, likely intentional, the banks’ plans failed the test. When you don’t know how the test will be scored, or even what will be on the test, you are unlikely to pass. Sort of like having to turn in a term paper without know what topic the professor will select.
Again, this article thinks it is wonderful that the banks are evaluated on criteria that are not disclosed to them.
Greek silver tetradrachm from Alexander the Great’s timeframe, showing Hercules wearing lion skin at obverse and Zeus at reverse, dated 323-315 BC. A tetradrachm is equal to four drachma. Image courtesy Adobe Stock.
Update: I have revised my calculations here. Adjusted the value of an Athenian talent from 10 years salary today up to 400 years salary due to the dramatic improvement in our wealth and standard of living in the last 200 years (the Great Betterment). Also adjusted from estimated average wage in the U.S. of $20 an hour to average wage for skilled construction worker of $70,000 per year. That takes the rough valuation from $20 billion to $1,400 billion, or $1.4 trillion. That actually seems to make sense in a very rough way.
Continuing my discussion of a few tidbits of financial information from Alexander the Great’s military campaigns.
When Alexander approached Susa, the capital of Persia, news of his non-stop victories preceded him. Previous cities he captured surrendered before he arrived. That typically spared most citizens their lives and prevented the torching of the city.
Thus, Susa was handed to him without a fuss, except for a huge amount that Darius III carted off well in advance of Alexander’s arrival.
The author looks at the various reports of how much loot was acquired. Integrating the report that is likely to be most reliable with the other reports results in an estimate Alexander capturing a haul of 40,000 talents of uncoined bullion and about 10,000 talents of gold coin. The gold is roughly valued by expressing the amount what it would be in silver value.
Apparently the Persians didn’t cast most of their precious metals into coins, instead preferring to mint what they needed as they needed it.
Revised value of a talent
Multiple changes have shifted the relative value of gold and silver in relation to each other and in relation to their purchasing power. Instead of converting a talent of silver into ounces and converting that to current dollars at current exchange rates, I’ll start looking at piles of money in terms of average days wages.
Warning: I plan to update my valuation of a Talent based on the radical improvement in living standards that has developed since the Industrial Revolution.
If you are curious and want to follow along, I’ll be spending a bit of time looking at some details of ancient finance.
If you are already somewhat familiar, feel free to either roll your eyes as I flounder along or chuckle on how slow I am to catch on. If your knowledge of ancient finances is comparable to mine, that is to say approximately zero, please feel free to join me on a journey to learn a few details.
Article in Wikipedia says some economists and historians say one drachma in the 5th century (let me do a mental calculation – – that would be from about 499BC to 401BC) was about US$25 in 1990 or US$46.50 in 2015.
Classical historians give a different read for the 5th and 4th centuries (okay, mental math time, so that would be from around 499BC to 301BC, the 400s and 300s). In that time, one drachma would be around one days wages for a skilled worker or a hoplite. So that would not be minimum wage, but more along the line of a carpenter or mason.
