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EternalHoH -> RE: Motley Fool weighs in on the budget crisis (2/17/2011 3:22:32 PM)
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Google "Interest Rate Swaps". Read up on an element of this, the bogus unfunded 'insurance' that becomes payable when interest rates go up. After all, what Fortune 500 business would not want to be reimbursed by 'insurance' when the costs of borrowing go up as a result of interest rate increases. In the end, it simply was a damn shame that an element of this 'insurance' mechanism turned out to be a ponzi scheme run by Wall St.
Just like with "Credit Default Swaps", which was bogus 'insurance' that was supposed to pay investors who owned mortgage-backed securities when unqualified homeowners defaulted on mortgages and turned those securities into dogshit. When that part of Wall Street's ponzi scheme collapsed, we came close to another depression.
Notational amounts on Housing swaps were around $60 trillion, and when that unraveled, it took down Bear, Lehman and AIG. Notational amounts on Interest Rate Swaps are over $400 trillion. How do we survive that? How do we use interest rates to control inflation without blowing up what remains of our financial industry?
This is the result, not of government, but of Wall St taking advantage of both technological and ethical loopholes that were handed to them by financial deregulation. Simpleton Americans voting on simpleton 'keep government out of private business' issues. Incredibly uneducated Rural America, those folks in 'flyover' territory, at their best (worst)!
I agree with Fellow that Obama is slowly coming around to the realization that there is no fix on the horizon; that it is beyond the point of repair with the tools he is 'authorized by the people' to use. When that $60 trillion sub-sector started to collapse, the only solution he had was to throw the federal purse at it, in an attempt to stop the chain of dominoes from falling. But now the same simpleton Americans who carried the water on deregulation now have an issue with his 'federal purse' approach. If I were Obama, I'd say "fuck them" and exit, too.
The global debt crisis is small compared to the Wall St. Legitimacy crisis. The global debt crisis is just like the unqualified homeowner crisis, both are ills, but the negative impact of both ills have been magnified many-fold by Wall St illegitimacy. We seem to have forgotten about that since Wall St came out of recession. Just because Wall St itself is making tons of money again does not mean the legitimacy of what it does has been restored.
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