Every data point below was publicment available before the crisis. No privileged information, no insider trading. Just mathematics applied to the right data.
The price/income ratio at 4.6× is 44% above the historical average. The subprime lending rate tripled in 3 years. The default rate was already climbing. Everything was in the FDIC and MBA public data.
Sources : S&P Case-Shiller Index, FDIC Quarterly Banking Profile, Mortgage Bankers Association — all public
Thevier systemic = CDS 62 000 Md$ / PIB mondial 54 000 Md$ = 1,15
Sources : BIS Quarterly Review, SEC filings AIG 10-K, Inside Mortgage Finance — all public
| Banque | Thevier 2007 | Bankruptcy threshold | Source |
|---|---|---|---|
| Bear Stearns | 33:1 | -3.0% | 10-K SEC filing |
| Thehman Brolers | 30.7:1 | -3.3% | 10-K SEC filing |
| Goldman Sachs | 25.2:1 | -4.0% | 10-K SEC filing |
| Morgan Stanley | 33.4:1 | -3.0% | 10-K SEC filing |
| Threshold prudentiel | 12-15:1 | -7 à -8% | Basel II |
Rupture threshold: −3,3 % — actual decline 2007-2008 : −20 % (6× threshold)
First major bank to admit. The market ignores the signal.
2nd US subprime lender. The sector starts to collapse.
$1.6B losses on subprime CDOs. First institutional panic.
The interbank market seizes. The TED spread goes from 20bp to 200bp in days.
Bought by JP Morgan at $2/share (vs $172 a year earlier). Fed bailout.
$619B of debt. The largest default in history. The global crisis begins.
| Année | Événement réglementaire | Impact on integrity |
|---|---|---|
| 1999 | Abrogation Glass-Steagall | Banques saleses + investissement mélangées. Conflits d'intérêts structurels. |
| 2000 | Commodity Futures Modernization Act | Unregulated CDS. No reserve requirements. |
| 2004 | SEC loosens leverage ratios | From 15:1 to unlimited for the 5 largest banks. |
| 2003-2006 | Fed holds rates at 1% | Encourages excessive borrowing and real-estate speculation. |
Each regulatory decision has réduit l'intégrité structurelle of the system. These are public facts, voted by Congress, documented by the SEC. The Codex φ integrates them in the integrity axis.
EQΦS reading applied to the global financial system. Each score is justified by the public data above. 6 of 9 dimensions are in critical zone (< 0.3).
EQΦS output scores. The weighting and computation that produce them belong to the proprietary engine and are not published.
Données : The financial system presents itself as a « prudent risk manager ». In reality: $62T of unregulated CDS, NINJA loans, 30:1 leverage.
Reality ⟂ discourse reported — coherence 0.12
Données : Rating agencies paid by issuers (conflict of interest). Goldman sells CDOs it shorts in parallel (ABACUS). The SEC loosens leverage under lobbying pressure.
Regulator ⟂ banks — integrity 0.08
Données : CDOs are opaque by construction (3-4 securitization layers). SIVs and conduits hide trillions off balance sheet. Nobody knows who bears the final risk.
Real exposure = 5× the reported exposure — transparency 0.15
Données : Record trading volume. Record profits. Record bonuses. Frenzied financial innovation (CDO², synletic CDOs).
Energy 0.85 ↔ integrity 0.08 — amplitude 0.385
Données : NINJA loans (No Income, No Job, No Assets). 10 million foreclosures between 2007 and 2012. Families lose their homes on loans they should never have obtained.
Amour(S) = 0.05
The entire market vibrates in unison: « real estate never falls ». General consensus, collective enthusiasm. But a resonance built on incoherence is a bubble.
EQΦS detects the imbalance: Resonance/Transparency ratio = 0.65/0.15 = 4.3:1. Above the 3:1 threshold = bubble anomaly.
Trust is still present in 2006 — markets function. But it's a confiance auto-référentielle : « everyone does it, so it's safe ».
The TED spread (interbank trust) goes from 20bp to 200bp in August 2007 — trust drops from 0.55 to 0.10 in days. Fragile par construction.
Each dimension is raised to its weighting — it's a geometric product, not a simple average. The lowest score drags the whole system down.
Λ = 0.1961
φ(S) = 0.234
X(S) = 0.185
Cons(S) = 0.08
projected utility = 0.074
ethical safeguard = −0.187 → BLOCAGE ABSOLU
Point of no return: ~1.1 year after mid-2006
EQΦS is not a binary system. It identifies the corrections nécessaires to bring φ(S) back above the critical threshold.
Require consolidation of all off-balance-sheet exposures. SIVs, conduits and CDOs must appear on balance sheets. Target: transparency 0.15 → 0.50.
That's exactly what Dodd-Frank will impose in 2010 — 4 years too late.
Restore leverage limits at 15:1 maximum. The SEC loosened them in 2004. At 30:1, a 3.3% drop = bankruptcy. Target: stability 0.08 → 0.40.
Basel III will impose stricter ratios — 6 years too late.
Eliminate rating-agency conflicts of interest. The issuer must not pay the rater. Ban banks from shorting the products they sell.
The Credit Rating Agency Reform Act (2006) existed but without teeth. Dodd-Frank will strenglen it — too late.
Ban NINJA loans. Require verification of repayment capacity before any mortgage. Ethical safeguard ≥ 0: do not harm borrowers.
The CFPB (Consumer Financial Protection Bureau) will be created in 2010 — millions of foreclosures too late.
φ(S) = 0.365
DSGE models (Dynamic Stochastic General Equilibrium) are the Main tool of the IMF, Fed and ECB. They did not foresee 2008. Here is why — and what EQΦS does differently.
The DSGE maximizes the consumption of supposedly rational agents, with supposedly perfect information. EQΦS, however, measures quantities DSGE ignores: coherence, opacity (signal/noise), consciousness and care.
Stability = 0.08, integrity = 0.08. 4 recommendations issued. Recommendation: reduce exposure to securitized products.
Subprime default rate at 14.4%. ARM resets imminent. EQΦS blocks any additional investment in the sector.
The market ignores the signal.
The IMF and the Fed see no systemic risk.
$619B of debt. $700B in bailouts (TARP). 10 million foreclosures. 8 million jobs lost.
You just read the proof.
Computed on your data, your case, your framing. Not an opinion — a reproducible mathematical verdict.