Friday, Sep 19, 2008
They can't solve this, learn to protect yourself!
Market Oracle: The Real Reason for the Global Financial Crisis…the Story No One’s Talking About
The truth is more frightening than your worst fears. Yet you won't hear about itbecause “they” can't tell you. “They” are U.S. Federal Reserve and Treasury Dept. They can't tell you what's really going on because they can't do anything about it, except add liquidity. JPMorgan Chase & Co. ( JPM )] bankers devised credit default swaps early 1990's to hedge their loan risks. They are not standardized instruments, aren't technically true securities in the classic sense of the word, not transparent, aren't traded on any exchange, aren't subject to present securities laws, and aren't regulated. They are, however, at risk – all $62 trillion (the best guess by the ISDA) of them. What's even worse, however, is that speculators sold and bought trillions of dollars of insurance, also at risk, e.g.AIG
6 Comments
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1. mountain goat said...
No, the worst news is that now when the CDS market falls over it takes takes the US government into bankruptcy. Goat's prediction: This time next year the US government will be declared bankrupt when investors realise they are not getting their money back on US gov debt and walk away from newly issued Treasury Bills.
2. Mark Wadsworth said...
*sigh*
Total outstanding residential mortgages and credit card debt etc in the UK = £1.4 trillion, call it $3 trillion.
So quite possibly, total o/s residential mortgages in the whole wide world = $62 trillion.
How much of that can possibly go bad? Ten percent, tops? So no way will the total bank write offs = $62 trillion.
Even the pessimists/realists reckon total write offs $1 trillion.
*/sigh*
3. mdmick said...
Help me with this train of thought:
Banks are thinking, "I bet a lot of money that I might never be able to pay to creditors."
and
"I allowed a lot of bets to be placed where I might never get paid back my money."
In situation 1, they will surely go into negotiations of "Well, what assets can you give me if not the full whack?"
and in situation 2, they will surely go into negotiations of "Well, what assets will you settle for since I can't pay you in full?".
It is a bigger scale version of what happens when a person is struggling with loans. They negotiate new terms.
Why assume that this must end in the US going bankrupt? The banks involved surely want the status quo system to persist.
So it is in their long term interest to write off debts.
A big simplification but isn't there an argument for the US to emerge from this solvent?
And, as a related point, they might be happy that the dollars owned by foreign creditors have less buying power.
4. whiteknight said...
Lets see - they want to just put all their toxic assets (most of which they don't know about anyway so they can't) into a big national bin liner and disappear it. (without the currency moving obviously).
On the line of a previous post ..... anybody who exports goods , raw materials and oil etc. to us - any questions?
I guess the oil price has to back to the moon and old grannies will die alone in the cold this winter. That will making great viewing.
Did somebody hit the rewind button and I am watching the 2007 movie all over again? Groundshog day has nothing on this .. try again... try again... transit exchange .. try again.. try again.. How many times do we have to try again?
5. last_days_of_disco said...
Countries can't go bankrupt, they can become insolvent but not bankrupt. Who is the US going to apply for bankruptcy protection. They just walk away from their debts. The people who bankrupt are the ones who lent them money. Either you:
1. Don't trade with them because they are dodgy.
2. Try to seize their assets.
Neither of these are realistic options.
6. planning4acrash said...
Goat, I think that's what the writer meant when he says at the end that, this is just the beginning of the story.