isomorphismes

In the 80s-90s futures markets that I dabbled in, one peculiarity was a seeming pre-cursor of a big daily move in one commodity by another, oftentimes fundamentally non-correlated! The trading floor at 4 World Trade Center, depicted in D. Amiche’s Orange Juice debacle “Trading Places”, was shared by pits as varied as Coffee and Platinum. A number of prolific personages owned a Gold-colored Badge, allowing them to step into any and every pit and trade. It happened quite often that guided by noise-level alone, such local speculators would migrate to Sugar albeit for one day - while their decades-long specialty was Gold! That wasn’t a surprising move by a trader; surprising was the next-day jump by that trader’s own market! There was a lot of psychological, herd and greed factor involved; but also there was an interesting exchange-finance angle to this pattern, where even a collapse in one pit might provoke a melt-up in another. You see, all locals and their sponsoring firms were in a financial leverage melting pot. Thus, cross-margin liquidation might be a rule of one random big day. Winding down someone’s Long stock-index position could also mean blowing him out of his Short Cotton position!
The reason I specified this took place in pre-electronic era is that exchange individual position limits were much looser then. Today such cross-margin liquidation would more likely ensue from over-the-counter derivative portfolio losses.

Kuznets himself was well aware that the compression of high US incomes between 1913 and 1948 was largely accidental. It stemmed in large part from multiple shocks triggered by the Great Depression and World War II and had little to do with any … automatic process. In … 1953 … he … warned readers not to make hasty generalizations. But in December 1954, … he offered a far more optimistic interpretation of his results …. It was this lecture, published in 1955 under the title “Economic Growth and Income Inequality,” that gave rise to the theory of the “Kuznets curve.” According to this theory, inequality everywhere can be expected to follow a “bell curve.” …. …….

Kuznets’s 1955 paper is enlightening. After … noting the obvious importance of exogenous shocks in the recent reduction of inequality in the United States, Kuznets suggests, almost innocently in passing, that the internal logic of economic development might also yield the same result, quite apart from any policy intervention or external shock. The idea was that inequalities increase in the early phases of industrialization …. Later, … inequality automatically decreases as a larger and larger fraction of the population partakes of the fruits of economic growth. The “advanced phase” of industrial development is supposed to have begun toward the end of the nineteenth or the beginning of the twentieth century in the industrialized countries, and the reduction of inequality observed in the United States between 1913 and 1948 could therefore be portrayed as one instance of a more general phenomenon, which should theoretically reproduce itself everywhere, including underdeveloped countries then mired in postcolonial poverty.

The data Kuznets had presented in his 1953 book suddenly became a powerful political weapon. He was well aware of the highly speculative nature of his theorizing. Nevertheless, by presenting such an optimistic theory in the context of a “presidential address” to the main professional association of US economists, an audience that was inclined to believe and disseminate the good news delivered by their prestigious leader, he knew that he would wield considerable influence: thus the “Kuznets curve” was born. In order to make sure that everyone understood what was at stake, he took care to remind his listeners that the intent of his optimistic predictions was quite simply to maintain the underdeveloped countries “within the orbit of the free world.” In large part, then, the theory of the Kuznets curve was a product of the Cold War.