So what is unfolding is a Social War on a global scale – not the class war envisioned in the 19th century, but a war of finance against entire economies, against industry, real estate and governments as well as against labor. It is happening in the usual slow motion in which great historical transitions occur. But as in military conflicts, each battle seems frenetic and spurs wild zigzagging on the world’s stock and bond exchanges and currency markets. Michael Hudson
No idle chatter, here
(13 posts) (5 voices)
That Hudson bloke does go doesn't he? Sounds like me in the saloon bar after the 4th pint.
In a nutshell, we were dumb to have borrowed so much money. It's now a choice between paying them off to prop up the system, or letting it collapse. If we prop it up we have years of scrimping, if we let it collapse then it's back to 1929 or worse, but maybe we get to string up the bankers in the wave of anarchy that ensues. 50-50 really. I've got some rope if that helps.
I know I can be a bit thick at times, but who do we actually owe the money too?
Surely if £176bn is rolling around in the economy somewhere it must be doing some good?
It can't all have been cyphoned off into shadey deals and bonuses.
Seriously, who has got their hands on the missing billions?
How many Tony Blairs does it take to bankrupt a country?
That to me has been the real unanswered question that has been swept under a very large carpet.
In many cases, Mr Roat, the value of the underlying asset was overstated; then there were 100% financings, i.e.: no new money went into the borrowing pool. Mortgage brokers popped up everywhere as soon as the banks began in earnest to sell the loans on, and not manage the collections. Industries overheated overnight on loan origination fees and servicing contracts.
But at the base, there were also a couple of three stuctural problemos: for example, when laundering vast scads of huge happy cash money, banks did pairs of back-to-back loans for the value, in exchange for hefty loan origination fees, of course. Once laundered (cash out the door) do you suppose that the loans were paid back? Why would you suppose that? who taketh the hitteroo on these big bananas? Well, if they smell like securitised loans and walk like securitised loans, then they get packaged like securitised loans and become...whoppeee! CDOs and the like. They go and get bundled with other shake-n-bake instant securities, they get insured at the flick of a switch, rated by the big Godfellas and then sold to
bagholders- oh, sorry, erm, what are those things called...yes: Retail Investors and Pensione funds.
Then there was the structural glitch, the sort of left overs or dross from short trades, in many stocks more securities were traded than the stock had floated shares. It just sums the finance big hitters don't bother to do, there's not much time during programme trading to figure these things on the bank of an envelope. so in the end, those excess shares are somehow defined as unresolved short sales. You know: cash in at a penny but don't take the stock. It didn't quite balance out, but were was a glut of these dodgy issues all big names way back in 1997, but we don't know for sure whether they turned into mortgage-backed securities or not. But you would think so, seeing the ease and swiftness with which those were pulled out of thin air.
So a lot of the money which appeared to be mortgage backed securites wasn't money at all, but it was all mixed in with other kinds of notes and then insured - for a fee.
Clear as mud.
But the other thing to bear in mind is that when the US Fed "issues" money, what we take to be tokens of value for exchange, it is already interest-bearing debt. You might snort and say, worthless, then! Well no: when Mummy says that money burns a hole in your pocket, she's making a sophisticated financial joke. The pound in your pocket is the hole of the interest plus the debt: it's a negative metaphysical entity.
Ipso facto: money "created" in this manner can never be repaid. The more we throw money at it, the more debt it creates through the magic of leverage which cannot be repaid either.
The Scot Law went bankrupt, didn't he? He was a very clever banker, too.
I have to agree with Jeni, Mr Thompson...its all a bit difficult to follow, really. Oh dear. Whatever will become of us? xxx
The more excellent the scam, the more complex and muddy the mess.
Is it a bit like Monopoly, then? Or nothing like that, really?
Nothing like Monopoly, Mr Munky.
OK, thank you, Mr Thompson.
Sorry My Thompson, but you seem to have lost us all. Can you explain in very simple analogies?
Closest I can get is that it's like a big game of pass the parcel. The banks sold cheap cash to the Mortgage companies, who had salesmen on commision so they sold as much cash on to the consumers as they could regardless of the risk. They just fudged the references and the figures of their clients to get their commision on the loan sales.
The banks cut up the loans and sold them on, and as this was done they all added their cut to what was sold. Eventually the whole scam went tits up when joe public began defaulting on the loans and property prices fell, so the collateral on the loans was now worth less than the loans. Faced with most of the banks going bust, the state (that's us) stepped in bought up the bad loans at what they were valued at before the crash, so we were left holding the empty parcel at the end of the game while everyone else in the chain had got a prize every time they passed it on.
The parcels never were worth what they were valued at before the game stopped, so the banks were declaring 'made up money' as profit, and paying bonuses on it. Once the game stopped, they were stuffed.
So, if I have a pound coin, it's actually worth less than a pound?
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