The Inverse Philosopher's Stone
Let us examine a method to detect fragility – the inverse philosopher's stone.
We can illustrate it with the story of the giant government sponsored lending firm called Fannie Mae
A corporation that collapsed leaving the taxpayer with trillions of dollars worth of debt & historical losses, ( and, alas, still, counting).
One day in 2003, Alex Berenson, a New York Times journalist produced a secret risk report to a Quant trader in New York City. A defector had passed these documents to Alex. It was the kind of report getting into the guts of risk methodology that for risk calculation only an insider can see – Fannie Mae made it's own risk calculations and disclosed whatever it wanted to whomever it wanted, the public or someone else. But only a defector could reveal the guts to see how the risk was calculated.
Alex, and said Quant, looked at the report: simply, a move upward in an economic variation led to massive losses, a move downward (in the opposite direction), to small profits. Further moves upward led to even larger additional losses and further moves downward to no profits. Acceleration of severe harm was obvious – in fact it was monstrous. So they can immediately see that a major blowup was inevitable: all exposures were severely "concave."
The Quant, a philosopher too, after viewing the report, worked purely on emotions not his brain, having a pang before even calculating any numbers from the report. It was the mother of all fragilities. A smear campaign ensued, nothing too notable. A few calls calling a few people charlatans. The key equation is the nonlinear is vastly more affected by extreme events – and nobody was interested in extreme events since they had a mental block against them.
The Quant went around telling anyone who would listen to him, including random taxi-drivers that a United States government-sponsored enterprise was "sitting on a barrel of dynamite."
Of course blow-ups don't happen everyday( just as poorly built bridges don't collapse immediately), and people kept on saying he was wrong and unfounded. His position of Quant enabled him to check similar institutions, and seeing that the problem was general, he realised that a total collapse of the banking system was a certainty.
If a 20kg rock was dropped on your stomach once it would hurt more than a 5kg rock dropped 4 times.
Anticipating these these extreme events, being prepared and ready and knowing the course of action to take, developing from the observer into the doer. Taking an advantage of an opportunity like a global financial wreckage. This can eternally benefit your and your loved ones. The Quant, became a flâneur – his family became financially independent for life. He knew when the bear was beginning before everyone else. He did the same on Black Monday in 1987 – by selling on multiple markets -commodities, indices, stocks, shares, futures and options.
After this event the Quant became a flâneur sauntering around – lunching with Fat Tony and Doctor John observing and writing the fastest selling book of all time. Spending 36 weeks on the New York Times Bestseller list
'Fat Tony' or 'Horizontal Tony' is Tony DiBenedetto an intuitive guy who has never read a book in his life. He had a good appetite and was a renowned and celebrated luncheon date for restaurateurs, and resident office inmates alike. These inmates had liquefied stress hormones dripping from their pores, those who exhibit severe anxiety if they discuss anything that may divert them from what they think is the course of their "work," and when in the process of picking their brain you hit on a less uninteresting mine, they will cut you short with a "I have to run" or I have a two-fifteen."
The flâneur at flâneur attended Mathematics conventions.
He was scoffed at, banned and excluded from others.
Crypto economics was a development of the last global recession and banking crisis. Bitcoin and blockchain was a defence mechanism that was born out of the catastrophe, the latest, most certainly not the last, major ruin in central banking.
In another occurrence of crisis, the price of crypto will rocket. People will want to take all assets out of stocks, shares, and Indices, options, and futures and funnel it into crypto and certain commodities. Their trust in central banks will reach an all-time low.