> RoMunn wrote: > What we are confronting is the result of many factors: >
Nope. It's the result of unregulated markets that were able to create investment instruments that gave them the profits and sent the risk to the taxpayer. "Swaps" essentially allow anyone to become an insurance company. Unregulated. The uncertainty in the market right now is solely because nobody knows anybody's exposure to the insurance contracts and the people that own and sold them don't know their own exposure. This is what Soros means by "don't understand". He knows exactly how they work. So do you, it's just like your car insurance. What he doesn't understand is the impact. See, anybody that sold these things has collateral requirements built into the contract based on their credit ratings. But nobody understands anyone else's risk. So how can you know credit rating? If you don't know that how do you judge risk? You can't. Uh oh. So what happened with AIG is that some of the insured securities started to fail. Then the credit ratings agencies downgraded them. Overnight this meant their collateral requirements - per swaps contracts - jumped by $14 billion. Overnight! They didn't have the cash so they were toast. Think about that though. Nobody knew what the exposure was because a.) they didn't know WHAT was insured, and b.) they didn't know WHO was insured. And nobody still does. So take all the people on this board. Let's say we all knew we had some exposure. And let's say lister X had just gone down due to a downgrade of their credit. Well that credit downgrade was somewhat arbitrary so we have no certainty on who else on the list might get suddenly down graded. We also don't know what will happen to that person IF they get downgraded. So what happens? Everyone freezes. All us listers hoard cash because we don't know if we'll get downgraded and suddenly need it like AIG. That means we don't spend, we don't lend, we freeze. Since everyone on this list is frozen, the bullshit market isn't getting it's normal supply of bullshit so its stock goes into the tank. Welcome to today's economy. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:273634 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=11502.10531.5
