Robin,
After you digest the writer's comments in this link, you may have a clearer
picture of what has/is with the USA financial crisis.
The writer points his finger at investment banks. They were once
partnerships and became public stock corporations. That led to kissing any
moral restraints and lawful intentions goodbye.
You must carefully study the wording used by the author in explaining
"bonds". The corporate stock investment market of outstanding shares is tiny
in comparison to the "bond " market. Share equity in a business does not
equate worth, onlyrepresents the total market value of outstanding shares.
A corporation may have a market cap of 20 bil and a net value of minus 20
bil. Why? because the money received by the sale of stock is gone. The
corporation survives by selling bonds.
Therein lies the dirty little secret of wall street. They may tout the "dow"
but they make their money selling bonds. The total outstanding bond value
"may" be some 500 times the size of the stock market. Nobody knows.
The writer is careful in what he infers but reading between the lines.. he
is suggesting the investment bankers started with sub-prime bonds and
learned how to game the system by issuing " parallel or mirror images of
bonds. While the sub-prime bonds may represent some 25 trillion in some form
of debt obligation,, the mirrors may be 100 to 500 times that amount.. again
, nobody knows.
If one wonders how the Fed could ever print this amount of money and put in
circulation... they can't and didn't.
Consider a single medium sizel school district in the USA with some 300
millions in bonded indebtiness. Now multiply that by 4,000 like school
districts to get a single snapshot of the mass amount of capital needed to
finance such a building splurge. Remember, this is only a single segment.
Add to this segment public utility bonds, port authority, airports,
highways, you name it. The total passes trillions into quads. The demand was
so great the investment bankers "invented" a way to address the desire..
that's all it took.
Look at the medical industry alone and notice Cristus med ( a Catholic
Charity) just issued another billion in bonds as they continue a never
ending expansion of the largest hospital firm in the USA.. Their total
bonded debt is not published because they are a private organization but it
can approach 1 trillion alone.
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?tid=true
The people in government that have looked at this nightmare simply stand in
shock. Others claim the gov't can fix is cuz the gov't caan fix anything..
that may hold for the nation.. but.. the bond traders corrupted the entire
world with "mirrors", some of which are total counterfeit. agan nobody
knows. Some nations are mad and want their money back.. but.. there ain't no
money.. they spent it building Disney world, Dubai and the Boston tunnel.
So far, the US gov't has promised some 700 bil to clean up the mess.. The
people getting the money are cashing in one batch of mirrors while printing
more. The people that made the problem are in charge of fixing the problem.
Last month, I wondered if the dow would test a 9000 bottom. After the
coverup and rescue of Citi-Bank, last week.. I must now accept there may not
be a bottom.. only a bottomless pit.
Negative thoughts, but , perhaps it's time to stop kidding ourselves..
everybody knew it was coming.. read the writer's admissions.
Richard
