> -----Original Message----- > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On > Behalf Of Kevin B. O'Brien > Sent: Friday, September 26, 2008 5:16 PM > To: Killer Bs (David Brin et al) Discussion > Subject: Re: Do low-probability catastrophic risks justify the bailout? > > Dan M wrote: > > For example, do you really think the odds of GE defaulting on 1 day > paper is > > significantly higher than it was 2 weeks ago? > > > You persist in thinking that this one factor should determine the price > of money in the market.
No, I persist it being obtuse. :-) That's not my point at all. >But in all markets the price is determined by the balance of supply and >demand. Yes, I definitely agree. >If the credit-worthiness of G.E. remained exactly the same, but >market conditions changed, the price that G.E. gets charged will change as >well. Absolutely. My point is that the change in the price GE gets charged is an indication/measure of this change in market conditions. <snip example of agreed upon point> > > Now, that presumes some degree of competitiveness in this market. I'll agree that exists; in fact my analysis presupposes it...so I'm snipping the rest of your point here...because I consider it preaching to the choir. :-) Now, what's important to me is the question of what else is changing. I can understand, with big financial firms going down, the price of financial notes going up....there is a real uncertainty in the exposure of different financial institutions to the toxic sub-prime mess....even if they appear to be removed by several degrees of separation from the mess. But, if non-financial companies that are not tied to the mess find their cost of borrowing rise significantly, then I think this is a measure of something other than the risk inherent in sub-prime mortgages. I've read a fair amount and talked with folks who have some connection/expertise. The consensus view is the jumping of the firewall from financial paper to non-financial paper is a critical measure that indicates a real possibility of very bad things happening soon. So, we can argue over that analysis; I realize that it's not the only one out there. But, IMHO, this is tied to some of the risks Gautam and I have been chatting about for the last four years. That's my point, as well as a guess of the type of thing it is. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
