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Author: utofbu on October 04 2008 Viewed 1345 times. 5 people liked this blog. You can rate it below if you haven't already.
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I think I figured out one of the prime culprits in this crisis we all are watchin unfold.
the amount of money that flows through the paper market every day is about 40% of the bailout bill. Sometimes its more, sometimes its less. so ostensibly, if bonds fail 3 days in a row, and cds's account for over 100% of daily leverage, the bailout will cover less than 3 days of loss. And considering that the bailout is distributed to more than just the paper market, you can assume that it would cover even less.I guess that is my point. I will get you real sources. 15-20 people in a single firm can blow a hole in the market like we are seeing.
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10/10/08
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eyesnine
it's all greenspan's fault:
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10/10/08
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jdg
know whos falt it is.. the baby boomers.. those greedy fucks.
10/10/08
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fakeBlooper
10/10/08
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utofbu
i blame the babies that I have yet to punch in the face
10/10/08
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eyesnine
this, of course, brings us to the classic philosophical riddle:
who's left to blame when all the babies have been punched in the face?
10/11/08
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utofbu
aaah the great mystery of mysteries
10/11/08
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tylth
it's just so great when the whole financial sysrm colappeses
10/11/08
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utofbu
I blame Walt Disney
10/12/08
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jogn
That documentary is from 2006, but i've seen documentaries/programs that have decried easy credit to consumers since the late 90s. As long as the guys at the pushing end of the money train keep spending their future dollars, everything's fine, but once that stops. poof! The investment/banks use that money to trade in derivatives like cds, the cherry of which is the lack of any reserve requirement to cover those positions means they can just stump up everything they have to fulfill part 3 of the underpants gnome masterplan - profit!
10/12/08
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astroid
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that's a good description of the panic portion of the problem. basically, a bunch of opaque mountains of capital, playing ad&d with people's money. banks need to make a bigger margin call because hey the banks are doing the same thing with THEIR hedge funds, the hedge funds suddenly can't sell their crap cdo's, and are forced to sell their actual long positions of 'real stocks'. times that by a billion and sprinkle some bloomberg, you get yourself a global panic.
hedge funds account for about 1 trillion dollars of dough. they probably won't exist for another 20-30 years after this fiasco.
10/13/08
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jogn
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here's another picture of what's happened. It's the financial equivalent of a direct contact disease becoming airborne.
10/14/08
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eyesnine
Anyone else notice that when the US bailout plan was approved the markets kept diving, but when the Euro plan is approved they go through the roof?
Now let me ask you this, what is the largest most powerful economic entity in the world right now?
The times they are a changin'
10/14/08
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eyesnine
Continuing that thought...
I've been saying that the real cause of this credit slump is the lack of foreign investment in the US economy, because, the US is no longer the safest bet for an investor. The US has been getting away with running up massive debt financed by foreign investment. This model is going to break down. Yesterday. Or probably more like four years ago. No one is willing to lend crazy money to the US government anymore.
I think that, when looking back on this in a few years, it will be seen as a "fake" dip in the markets. What I mean by this is that the world got scared when the sub prime mortgage bubble burst in the US. Everyone expected the problem to infect the entire neo liberal-capitalist economic world. And it did. Because people thought it would. I think this may be the very last time an American economic event is taken as seriously as this.
10/14/08
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jogn
Here's a pdf of foreign direct investment in the united states.
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and here's a value added by industry to the gdp
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There are actually 2 events - the mortgage crisis and the credit crisis. The credit crunch in the commercial paper market is directly attributable to the mortgage crisis. This mortgage/debt crisis is due to the availability of easy credit by the banks because the banks know they can repackage those debts and sell them somewhere else.
It might be that having more foreign investment would be a good thing, but what can anyone invest in? From the value add sheet, the US has moved from a manufacturing based economy to becoming financial oriented, and a big part of that is due to real estate. So what do foreign investors look at? REITs, real estate and related activities. For the big money in foreign investment, the developing and manufacturing countries is where it's at.
I wouldn't really say that the other bourses have gone through the roof, but i'd say that the appearance of paulson, ex goldman sachs, waving a 3 page bailout package plan that essentially said "give me 700 billion and don't ask where i spend it and how" was a real kick to the nuts, and an aha moment to the market that all was not well.
a-ha
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10/15/08
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utofbu
i love you guys
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