8/12/2023 0 Comments Goldilocks hair meaningThere is as well another interesting application of the Goldilocks principle in medicine where it refers to a drug that can hold both antagonist (inhibitory) and agonist (excitatory) properties. In the case of central bankers, they are less likely to look away from their idealized outdated models, hence our recent discussion surrounding the failing of their much vaunted Phillips curve they have tried to exploit. This effect was observed in infants, who are less likely to look away from a visual sequence when the current event is moderately probable, as measured by an idealized learning model (Phillips curve). What we find of interest is that in cognitive science and developmental psychology, the Goldilocks effect or principle refers to an infant's preference to attend to events which are neither too simple nor too complex according to their current representation of the world, same goes with central bankers. The analogy is based on the children's story, The Three Bears, in which a little girl named Goldilocks tastes three different bowls of porridge (ZIRP, QE, NIRP?), and she finds that she prefers porridge which is neither too hot nor too cold but has just the right temperature. The Goldilocks principle is the idea that there is an ideal amount of some measurable substance, an amount in the middle or mean of a continuum of amounts, and that this amount is "just right" for a life-supporting condition to exist. Looking at the sudden violent dump in CDS protection for some issuers within the Itraxx Subordinated Financials CDS index due to HIS Markit revising index rules which will include in next roll UK and Swiss banks in the new index Series at HoldCo Level for the Senior and Subordinated Financial Indices, we reminded ourselves for our title analogy of the Goldilocks principle. "Harmony makes small things grow, lack of it makes great things decay." - Sallust
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