# Europe, the Eurozone Crisis, Complexity and Systemantics

The laws of systemantics are said to be pseudo-science. Fair enough. A few of these laws are listed below. They apply to highly complex systems. Think of these laws and then think of the EU and of the Euro.   Le Chatelier’s Principle: Complex systems tend to oppose their own proper function. As systems grow…

# Probability of Default Versus the Principle of Incompatibility

In circumstances characterized by high turbulence and interdependency: it is impossible to make predictions – in fact, even the current economic crisis (of planetary proportions) has not been forecast only very rough estimates can be attempted there is no such thing as precision it is impossible to isolate “cause-effect” statements as everything is linked optimization…

# Risk = Probability X Consequences. Really?

(image from http://www.impactlab.net)   Probably the most frequently used definition of risk is this one: Risk = the Probability of something happening X resulting Cost/Consequences This definition is flawed because of two fundamental reasons, which the formula itself suggests very eloquently: 1. Estimation of probabilities of future events is very difficult (while it is considerably…

# On the Complexity of Dynamics and the Dynamics of Complexity

When talking of derivatives and other sophisticated financial products, people often say that they are complex, that they have complex dynamics. But what does that really mean? When is dynamics complex? What does complex mean? A layman’s definition of complex is difficult to grasp, to understand, to control, to forecast. While mathematically speaking things a…

# Beyond Risk Management. What Are The Alternatives?

When facing large doses of uncertainty risk model-based methods of managing uncertainty don’t work. One thing is to manage an assembly line producing, for example, computer chips, another is to run a company in a globalized, turbulent, chaotic, non-stationary and shock-punctuated economy. Some things can be accomplished via mathematical modeling some cannot. Sure, you can…

# Is It Possible To Make Predictions?

Prediction of the future has always been man’s dream. However, there is an overwhelming amount of physical evidence that this is quite impossible. This is because the future is permanently under construction. Therefore, as every second passes, the future is changed. The cause of this are the laws of physics. If the future were predictable…

# A Resilience Test of US and EU banks. A Systems Perspective.

There is much discussion today about systemic risks. In particular, the notion of “systemic” banks or corporations has become popular, which indicates entities that have the capability of causing considerable damage to the economy in case of default. Such entities are often termed as “Too Big To Fail” and their footprint on the national and…