Saturday, September 26, 2015

Infographics: 'Probability' in the Eyes of an Investment Banker

This graph shows of a probability distribution...


And this is how the above graphic applies to the "probability of destroying the economy"  as seen from the eyes of an investment banker...


(hat tip Econolog's Prof B. Caplan)
How incredibly true.

Proof? Here is a quote from a domestic banker on the rapidly deflating Philippine casino bubble as I previously posted here.
Says a domestic bank fund manager “The chain reaction from Macau hit everyone…Expectations VIP players will come in large numbers didn’t happen. The stocks have fallen quite significantly but not everyone is rushing back in, and there’s no clear light at the end of the tunnel.” 
"The chain reaction...hit everyone" and "expectations...didn't happen" equals "no one could have foreseen this". 

This resonates with JM Keynes' "sound banker" strategy:
A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him
Expect more of this kind of Keynesian escape hatch gibberish to become the norm.  
 


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