Okay, I knew there was going to be a really nasty, long and slow recovery for the financial system, and I’ve been accused of being Chicken Little more than once, but all I can say is Holy Fucking Shit. My bud, Eric Janszen (third smartest man in the world) posted a bit over on iTulip that explains why none of the injecting, pumping and flooding of cash into the financial system can do any good. The piece requires a rudimentary knowledge of economics as well as financial and monetary policy, but the guts of it are as follows.
I made much the same case a few days back but when Eric tells it it’s more compelling and scary. Basically, the major banks shared their risks by buying and selling each other credit default swaps (CDS) so if their bets went bad, somebody would bail them out. An excellent metaphor in a comment on Eric’s post states that it was like a bunch of swimmers tying themselves together far at sea for safety, and then immediately take on more weight than they can handle, thus all sinking together. Basically and collectively they owe more money than there is in the world, something like most of a quadrillion dollars. That’s $1,000,000,000,000,000.00.
Hence the “Holy Fucking Shit” comment above. That’s about $150,000 for every man, woman and child on earth, or about three million dollars for every American. That much money simply does not exist. The American, and therefore global financial system is dead. Kaput. Finished. And no bailout is going to help.
Man! This thing is unwinnable. If you have any dollars at all, and live in a first world country, this stuff is really important to learn and understand.
1 comments:
WOAH
or maybe :
WOE
I wrote on my blog about 2 years ago that I gave blood to a dead woman. She was dying and no amount of my blood was going to help her. But her heartbroken daughter had asked me, and I had a pint to spare, and so did it for the daughter, rather than the dead lady ( we buried her 4 days after the transfusion. The woman had led a dissolute life, rolled the dice in a dicey game, and in many ways brought about her final demise.
When I read the ITULIP link, I was reminded of that...but now we are talking about being asked to be ready to give 150,000 pints to these dead bodies, whose CEO's and upper echelon were the dissolute gamblers in this case, I imagine. BUT the dissolute gamblers will go on. I bet every one of them has a hedge and a lot of it is non- Dollar assets.
Besides the clear distinction here between the left and right ( when you ruin the life of one child, there is no federal help for that child, but when you ruin the lives of the children of the entire auto industry, well, then, we need to keep you going via federal tax shelters, and when you screw that up, we will give actual tax money to you)
That makes me get your predictions of the masses roasting and eating these guys.
When the masses get their heads out of their [Fox News channel] and see how it happened, there will be, if there is any justice, hell to pay.
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