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Reply #62: I have finally wrapped my head around this fact.... [View All]

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AnneD Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-05-11 01:39 PM
Response to Reply #48
62. I have finally wrapped my head around this fact....
no amount of austerity and now amount of wealth we could ever create would bring the world back into solvency.

I think I am a person of average intelligence, and affinity for science and the technical. I have listened to Kieser and Matheson for over a year and the ramifications finally truly sunk in this weekend. This debt is leveraged way too much. Paying this off will only cause more leveraging. Because of the way these risks were packaged in the investments, no one, and I do mean no one will know how much exposure they have until it blows up.

Here is an example that I hope will make it clear. CAUTION: do not read this if you have just had lunch or breakfast. YOU HAVE BEEN WARNED.

Someone once explained that derivatives sold as investment vehicles was akin to sausage. You name it and it was sliced, diced, chopped and ground up was stuffed into this derivative sausage. This mortgage for a half a million dollar house sold to a hair dresser in Las Vegas, an $250k house to a chemical engineer in Texas, a Yacht note from a billionaire in the Florida Keys, a city Municipal bond to pay for construction of a new water treatment plant. All of these were used to make this derivative sausage. Now some of this was what in the old days would be called a safe bet. A chemical engineer in Texas would have no problem paying on a loan and a city bond is a fairly safe bet. A billionaire could probably pay for a yacht. But the hair dresser in Vegas, not so good.

Now suppose this sausage went on sale. Everyone said it was the best sausage they every had and folks started buying it. There was such a clamor to get it. People had to take numbers and stand in line. Folks that got their sausage found that there were folks willing to buy what they had at a price + a premium. Everyone was happy until.......

someone found a dead rat body parts in the sausage (maybe our hair dresser in Vegas or our billionaire that went bust when he invested heavily in MF Global-good luck there). So, to quote Dirty Harry-"Do you feel lucky punk."

You are holding this sausage. Is is clean or will you find an ear, a tail, or God forbid, an entire rat in your sausage. You will not know until you examine the contents of you sausage. And if there is a rat in your sausage what can you do. The butcher said it was good sausage, Kosher even (a food item can be 10% impure and still be labeled Kosher-and there are many that are not aware of that-but I digress). The company that made it will not give a refund, the butcher that sold it will not take it back and no one wants to buy it from you. You have no way of knowing what is in your sausage until you open it up. Now you have to eat soon because you are hungry. What will you do?

And that my friends is where we stand. We are about to cut into the sausage. Maybe just a small portion of your sausage is bad, maybe the whole thing is contaminated, but either way, you will never see sausage in the same light again.
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