For those who have not been following the news and do not have a fixed
opinion about the financial problems, let me add a bit of reality.
The collapse of the mortgage market was the event that started the
collapse but it was not the true cause. The big problem is the
derivative market. These are bets between companies about which way
various factors such as interest rates or the value of a security will
change. For example, I might buy a basket of mortgages and at the same
time buy a derivative such that I would be paid a fixed sum if the
value of the mortgages dropped below a certain value. Options in the
securities world are similar but are more closely regulated. The
problem is that the number of these derivatives has increased to a
huge amount, as high as 50 trillion depending to who makes the
calculation. Because they do not have to be reported, it is impossible
to know just how much money is at risk. When the value of mortgages
went down, some companies were required to make good on bets that
required payment if the value of mortgages would go down. Because of
the size of the bet made by some companies, they can't pay and will go
into bankruptcy. As a result, the company counting on this payment
also can't pay its debts. As a result, a problem has spread throughout
the system. The solution requires mortgages be priced higher and
money be supplied to allow these bets to be paid without the company
having to fold its tent. This is not a simple process and it will
invite certain people to gain an advantage. The only issue is how much
advantage will be allowed while actually solving the problem. The same
people who made the mess are trying to gain all they can while the
conservative Republicans and the Democrats are trying to limit the
advantage. Of course, McCain is trying to undo the damage his past
votes caused while looking like a reformer. Obama is trying to design
the bailout so that the pain is more evenly shared. Congress is
making its usual attempt to take the easiest path. The outcome will
determine the future of many people including some who supported the
policies that made the mess.
For people who do not understand what is happening to make ignorant
suggestions or to think nothing be done is extremely irresponsible.
This is like telling people on a sinking ship not to get into a
lifeboat because they think the ship can float will being filled with
water. Too late, their ignorance is proven wrong. Fortunately, most
people have been sense.
Ed
On Sep 25, 2008, at 4:56 AM, Remi Cornwall wrote:
Theeeeey're baaaaaaack part II.
http://news.bbc.co.uk/1/hi/uk/7634641.stm
Yes, yes, yes the megaphone of public office. Most of what they say
is true.
But guys, that's some fine silk you're wearing and you don't really
need a
cathedral to preach from as Christ did it in the open air. The land
capital
of the Anglicans is legendary.
Oh and I don't care if two (three, four, whatever) guys, sheep, cat
and dogs
get married in the privacy of their own homes.
Oh and tell you RC friends to stop fiddling with little boys too.
Looks like the good ol' feudal day of church and state are back this
time
they've got G.d, the poor, the environment and maybe a little bit of
veggie
fascism thrown in and male bashing too.
I'm just waiting for these guys to do some miracles, ol' Semtex
Sentamu to
turn that staff into a lightsabre and deflect laser beams and then
'yoda'
Williams to use the force and levitate things.
My advice - don't buy it.
Let the market correct itself and then some light obvious regulation:
No more interest only mortgages
More deposits up front with mortgages
More transparency (short selling would work then - move money from
over
inflated businesses to more deserving, wealth redistribution)
Separate high street banks from investment and insurance
Crisis what bloody crisis?
The public is the tit being milked right or is that the golden goose?
