>>> Jim Devine <[EMAIL PROTECTED]> 09/20/2007 9:50 AM >>> On 9/20/07, Charles Brown <[EMAIL PROTECTED]> wrote: > Lets say the banks didn't do what they did. To whom would all that > money have been " lost " ? Where was the money "saved" from going ?
If LTCM had gone broke, the paper wealth of its owners would have fallen. If any of them borrowed a lot to buy into LTCM (i.e., if they were heavily leveraged), they might have gone bankrupt. With LTCM itself bankrupt, its creditors would have lost a bunch. That would have encouraged them to cut back on loans to others (assuming it didn't drive them into backruptcy). Either of these encourage a cutback in loans and spending, encouraging recession. Any organizations similar to LTCM would have had problems, too. Paper wealth would have been destroyed. That's only a big problem if it corresponds to borrowings (leverage). ^^^^^^^ CB: Thanks , Jim. It seems like the main immediate losers would be wealthy institutions and individuals, with a recession affecting regular incomed folks in the longer run. I still have some problem conceptualizing this whole thing ( duh, smile). When a hedge fund is operating normally, everybody involved is making big bucks ( paper bucks ?). Hedge fund owners, their creditors, others ...Where does all that money they make come from ? The mass of debtors at the bottom of the food chain ? Jim, what is your sense of "paper wealth" ? I'm thinking you mean something like there is no underlying exchange value in Marx's sense. I guess paper wealth is sort of Marx's fictional capital ? On the surface it _seems_ like that , for example , in the subprime mortgage crisis, the main losers are banks and lenders. That seems strange to me. Or maybe it's that they have so much paper money to play with ( sort of like Monopoly game play money) that there is no significant individual impoverishment, just a reconfiguration of the Leviathan, the Monopoly playing board, so to speak
