Consumer Advisory Bulletin, Avoid Pyramid Schemes, January 2008

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Economic shocks and crime: evidence from the crash of ponzi schemes

In November 2008, Colombian authorities dismantled a network of Ponzi schemes, making hundreds of thousands of investors lose tens of millions of dollars throughout the country. Using original data on the geographical incidence of the Ponzi schemes, this paper estimates the impact of their break down on crime. We find that the crash of Ponzi schemes differentially exacerbated crime in affected districts. Confirming the intuition of the standard economic model of crime, this effect is only present in places with relatively weak judicial and law enforcement institutions, and with little access to consumption smoothing mechanisms such as microcredit. In addition, we show that, with the exception of economically-motivated felonies such as robbery, violent crime is not affected by the negative shock.

Economic growth with bubbles

We develop a stylized model of economic growth with bubbles. In this model, changes in investorsentiment lead to the appearance and collapse of macroeconomic bubbles or pyramid schemes.We show how these bubbles mitigate the effects of financial frictions. During bubbly episodes,unproductive investors demand bubbles while productive investors supply them. These transfersof resources improve the efficiency at which the economy operates, expanding consumption, thecapital stock and output. When bubbly episodes end, these transfers stop and consumption, thecapital stock and output contract. We characterize the stochastic equilibria of the model and arguethat they provide a natural way of introducing bubble shocks into business cycle models.

Theoretical notes on bubbles and the current crisis

We explore a view of the crisis as a shock to investor sentiment that led to the collapse of abubble or pyramid scheme in financial markets. We embed this view in a standard model of thefinancial accelerator and explore its empirical and policy implications. In particular, we show howthe model can account for: (i) a gradual and protracted expansionary phase followed by a suddenand sharp recession; (ii) the connection (or lack of connection!) between financial and real economicactivity and; (iii) a fast and strong transmission of shocks across countries. We also use the modelto explore the role of fiscal policy.

Bubbly collateral and economic activity

This paper develops a model of the bubbly economy and uses it to study the effects of bailoutpolicies. In the bubbly economy, weak enforcement institutions do not allow firms to pledge futurerevenues to their creditors. As a result, "fundamental" collateral is scarce and this impairs the intermediationprocess that transforms savings into capital. To overcome this shortage of "fundamental"collateral, the bubbly economy creates "bubbly" collateral. This additional collateral supports anintricate array of intra- and inter-generational transfers that allow savings to be transformed intocapital and bubbles. Swings in investor sentiment lead to fluctuations in the amount of bubblycollateral, giving rise to bubbly business cycles with very rich and complex dynamics.Bailout policies can affect these dynamics in a variety of ways. Expected bailouts provideadditional collateral and expand investment and the capital stock. Realized bailouts reduce thesupply of funds and contract investment and the capital stock. Thus, bailout policies tend to fosterinvestment and growth in normal times, but to depress investment and growth during crisis periods.We show how to design bailout policies that maximize various policy objectives.

Securities: Its Conception and Protection of Interests of its Holders

Theoretical studies of the problems of the securities markets in the Russian Federation incline to one or other of the two traditional approaches. The first consists of comparing the definition of "valuable paper" set forth in the current legislation of the Russian Federation, with the theoretical model of "Wertpapiere" elaborated by German scholars more than 90 years ago. The problem with this approach is, in Mr. Pentsov's opinion, that any new features of the definition of "security" that do not coincide with the theoretical model of "Wertpapiere" (such as valuable papers existing in non-material, electronic form) are claimed to be incorrect and removed from the current legislation of the Russian Federation. The second approach works on the basis of the differentiation between the Common Law concept of "security" and the Civil Law concept of "valuable paper". Mr. Pentsov's research, presented in an article written in English, uses both methodological tools and involves, firstly, a historical study of the origin and development of certain legal phenomena (securities) as they evolved in different countries, and secondly, a comparative, synchronic study of equivalent legal phenomena as they exist in different countries today. Employing the first method, Mr. Pentsov divided the historical development of the conception of "valuable paper" in Russia into five major stages. He found that, despite the existence of a relatively wide circulation of valuable papers, especially in the second half of the 19th century, Russian legislation before 1917 (the first stage) did not have a unified definition of valuable paper. The term was used, in both theoretical studies and legislation, but it covered a broad range of financial instruments such as stocks, bonds, government bonds, promissory notes, bills of exchange, etc. During the second stage, also, the legislation of the USSR did not have a unified definition of "valuable paper". After the end of the "new economic policy" (1922 - 1930) the stock exchanges and the securities markets in the USSR, with a very few exceptions, were abolished. And thus during the third stage (up to 1985), the use of valuable papers in practice was reduced to foreign economic relations (bills of exchange, stocks in enterprises outside the USSR) and to state bonds. Not surprisingly, there was still no unified definition of "valuable paper". After the beginning of Gorbachev's perestroika, a securities market began to re-appear in the USSR. However, the successful development of securities markets in the USSR was retarded by the absence of an appropriate regulatory framework. The first effort to improve the situation was the adoption of the Regulations on Valuable Papers, approved by resolution No. 590 of the Council of Ministers of the USSR, dated June 19, 1990. Section 1 of the Regulation contained the first statutory definition of "valuable paper" in the history of Russia. At the very beginning of the period of transition to a market economy, a number of acts contained different definitions of "valuable paper". This diversity clearly undermined the stability of the Russian securities market and did not achieve the goal of protecting the investor. The lack of unified criteria for the consideration of such non-standard financial instruments as "valuable papers" significantly contributed to the appearance of numerous fraudulent "pyramid" schemes that were outside of the regulatory scheme of Russia legislation. The situation was substantially improved by the adoption of the new Civil Code of the Russian Federation. According to Section 1 of Article 142 of the Civil Code, a valuable paper is a document that confirms, in compliance with an established form and mandatory requisites, certain material rights whose realisation or transfer are possible only in the process of its presentation. Finally, the recent Federal law No. 39 - FZ "On the Valuable Papers Market", dated April 22 1996, has also introduced the term "emission valuable papers". According to Article 2 of this Law, an "emission valuable paper" is any valuable paper, including non-documentary, that simultaneously has the following features: it fixes the composition of material and non-material rights that are subject to confirmation, cession and unconditional realisation in compliance with the form and procedure established by this federal law; it is placed by issues; and it has equal amount and time of realisation of rights within the same issue regardless of when the valuable paper was purchased. Thus the introduction of the conception of "emission valuable paper" became the starting point in the Russian federation's legislation for the differentiation between the legal regimes of "commercial papers" and "investment papers" similar to the Common Law approach. Moving now to the synchronic, comparative method of research, Mr. Pentsov notes that there are currently three major conceptions of "security" and, correspondingly, three approaches to its legal definition: the Common Law concept, the continental law concept, and the concept employed by Japanese Law. Mr. Pentsov proceeds to analyse the differences and similarities of all three, concluding that though the concept of "security" in the Common Law system substantially differs from that of "valuable paper" in the Continental Law system, nevertheless the two concepts are developing in similar directions. He predicts that in the foreseeable future the existing differences between these two concepts will become less and less significant. On the basis of his research, Mr. Pentsov arrived at the conclusion that the concept of "security" (and its equivalents) is not a static one. On the contrary, it is in the process of permanent evolution that reflects the introduction of new financial instruments onto the capital markets. He believes that the scope of the statutory definition of "security" plays an extremely important role in the protection of investors. While passing the Securities Act of 1933, the United States Congress determined that the best way to achieve the goal of protecting investors was to define the term "security" in sufficiently broad and general terms so as to include within the definition the many types of instruments that in the commercial world fall within the ordinary concept of "security' and to cover the countless and various devices used by those who seek to use the money of others on the promise of profits. On the other hand, the very limited scope of the current definition of "emission valuable paper" in the Federal Law of the Russian Federation entitled "On the Valuable Papers Market" does not allow the anti-fraud provisions of this law to be implemented in an efficient way. Consequently, there is no basis for the protection of investors. Mr. Pentsov proposes amendments which he believes would enable the Russian markets to become more efficient and attractive for both foreign and domestic investors.

Estimating losses in teleportation schemes using the phenomenological operator approach to dissipation in cavity quantum electrodynamics

In this paper, we estimate the losses during teleportation processes requiring either two high-Q cavities or a single bimodal cavity. The estimates were carried out using the phenomenological operator approach introduced by de Almeida et al. [Phys. Rev. A 62, 033815 (2000)].

HORMONAL RESPONSES TO DIFFERENT RESISTANCE EXERCISE SCHEMES OF SIMILAR TOTAL VOLUME

Uchida, MC, Crewther, BT, Ugrinowitsch, C, Bacurau, RFP, Moriscot, AS, and Aoki, MS. J Strength Cond Res 23(7): 2003-2008, 2009-This study assessed the effect of different resistance exercise scheme (RES) designs of similar total of load lifted on the responses of testosterone, cortisol, and creatine kinase (CK). Twenty-seven healthy males performed 1 of 4 bench press workouts described by the 1 repetition maximum (1RM) load: 4 sets of maximum repetitions at 50%-1RM (50%-1RM RES), 5 sets of maximum repetitions at 75%-1RM (75%-1RM RES), 10 sets of maximum repetitions at 90%-1RM (90%1RM RES), or 8 sets of maximum repetitions at 110%-1RM (110%-1RM RES). Each RES was equated by the total volume of load lifted (repetitions x sets x load). Blood samples, collected pre-exercise (Pre) and post-exercise (Post) at 1 and 24 hours (24 h), were analyzed for total and free testosterone, total cortisol, and CK. In general, testosterone and cortisol showed little change within or between the different RES (p > 0.05), possibly because of the relatively low volume lifted and/ or the small muscle mass activated by the bench press exercise. Cortisol was elevated after the 75%-1RM RES at the Post sample, with this response also exceeding the other RES (p < 0.05). The 24 h CK response was also elevated after the 75%-1RM RES (p < 0.05), thereby suggesting greater training strain for the same volume of load. These results confirm previous recommendations regarding the prescription of resistance exercise and the importance of total volume as a stimulus for activating the endocrine system and achieving long-term adaptation.

SALIVARY HORMONE AND IMMUNE RESPONSES TO THREE RESISTANCE EXERCISE SCHEMES IN ELITE FEMALE ATHLETES

Nunes, JA, Crewther, BT, Ugrinowitsch, C, Tricoli, V, Viveiros, L, de Rose Jr, D, and Aoki, MS. Salivary hormone and immune responses to three resistance exercise schemes in elite female athletes J Strength Cond Res 25(8): 2322-2327, 2011-This study examined the salivary hormone and immune responses of elite female athletes to 3 different resistance exercise schemes. Fourteen female basketball players each performed an endurance scheme (ES-4 sets of 12 reps, 60% of 1 repetition maximum (1RM) load, 1-minute rest periods), a strength-hypertrophy scheme (SHS-1 set of 5RM, 1 set of 4RM, 1 set of 3RM, 1 set of 2RM, and 1set of 1RM with 3-minute rest periods, followed by 3 sets of 10RM with 2-minute rest periods) and a power scheme (PS-3 sets of 10 reps, 50% 1RM load, 3-minute rest periods) using the same exercises (bench press, squat, and biceps curl). Saliva samples were collected at 07:30 hours, pre-exercise (Pre) at 09:30 hours, postexercise (Post), and at 17:30 hours. Matching samples were also taken on a nonexercising control day. The samples were analyzed for testosterone, cortisol (C), and immunoglobulin A concentrations. The total volume of load lifted differed among the 3 schemes (SHS > ES > PS, p < 0.05). Postexercise C concentrations increased after all schemes, compared to control values (p < 0.05). In the SHS, the postexercise C response was also greater than pre-exercise data (p < 0.05). The current findings confirm that high-volume resistance exercise schemes can stimulate greater C secretion because of higher metabolic demand. In terms of practical applications, acute changes in C may be used to evaluate the metabolic demands of different resistance exercise schemes, or as a tool for monitoring training strain.

Online Mammographic Images Database for Development and Comparison of CAD Schemes

Considering the difficulties in finding good-quality images for the development and test of computer-aided diagnosis (CAD), this paper presents a public online mammographic images database free for all interested viewers and aimed to help develop and evaluate CAD schemes. The digitalization of the mammographic images is made with suitable contrast and spatial resolution for processing purposes. The broad recuperation system allows the user to search for different images, exams, or patient characteristics. Comparison with other databases currently available has shown that the presented database has a sufficient number of images, is of high quality, and is the only one to include a functional search system.

A Geometric Approach for Turbo Decoding of Reed-Solomon Codes in QAM Modulation Schemes

This work studies the turbo decoding of Reed-Solomon codes in QAM modulation schemes for additive white Gaussian noise channels (AWGN) by using a geometric approach. Considering the relations between the Galois field elements of the Reed-Solomon code and the symbols combined with their geometric dispositions in the QAM constellation, a turbo decoding algorithm, based on the work of Chase and Pyndiah, is developed. Simulation results show that the performance achieved is similar to the one obtained with the pragmatic approach with binary decomposition and analysis.

Strain-dependent fluid flow defined through rock mass classification schemes

Strain-dependent hydraulic conductivities are uniquely defined by an environmental factor, representing applied normal and shear strains, combined with intrinsic material parameters representing mass and component deformation moduli, initial conductivities, and mass structure. The components representing mass moduli and structure are defined in terms of RQD (rock quality designation) and RMR (rock mass rating) to represent the response of a whole spectrum of rock masses, varying from highly fractured (crushed) rock to intact rock. These two empirical parameters determine the hydraulic response of a fractured medium to the induced-deformations The constitutive relations are verified against available published data and applied to study one-dimensional, strain-dependent fluid flow. Analytical results indicate that both normal and shear strains exert a significant influence on the processes of fluid flow and that the magnitude of this influence is regulated by the values of RQD and RMR.

Two-link approximation schemes for loss networks with linear structure and trunk reservation

Loss networks have long been used to model various types of telecommunication network, including circuit-switched networks. Such networks often use admission controls, such as trunk reservation, to optimize revenue or stabilize the behaviour of the network. Unfortunately, an exact analysis of such networks is not usually possible, and reduced-load approximations such as the Erlang Fixed Point (EFP) approximation have been widely used. The performance of these approximations is typically very good for networks without controls, under several regimes. There is evidence, however, that in networks with controls, these approximations will in general perform less well. We propose an extension to the EFP approximation that gives marked improvement for a simple ring-shaped network with trunk reservation. It is based on the idea of considering pairs of links together, thus making greater allowance for dependencies between neighbouring links than does the EFP approximation, which only considers links in isolation.