think of a huge gigantic straight line of dominoes.
the first is an asset
the second one is a loan against the first
the third one is an insurance policy guaranteeing the loan
the fourth is the sale of the second to some party unrelated to the original transaction
the fith is like the fourth with even more insurance guaranteeing the value of the promises made
and at about domino number 10, the original asset that created the game, is hard to find, but all of the relationships that were created around it continue on and on and on and on with more guarantees, more insurances, and ultimately nearly all the original risk, around the original asset and loan, has been priced away into nothingness.....
until one fine day, the original loan is not repaid. suddenly, way down at domino number one million, the holder of that paper (given its birth one million dominoes ago), receives word he will not be paid interest, or he will not be paid principal. he says, fuck that, i have a guarantee. so he calls domino number 999,999,999 and says pay up. 999etc says, no can do, but 999,999,998 is backing things up....
and this goes on until somewhere in the middle domino number one and domino number 1 million meet, wrapping their arms around all the dominoes in between, and all the notational or book entries for all those dominoes. this huge hug from one to 1 million sqeezes all of those numbers so hard, the entire line of dominoes implodes into the primordial nothingness from whence it was created, leaving nothing visible except some little plot of land somewhere and a ramshackle long deserted house, that can't be sold again because no one has any money to loan to a buyer, or because everyone is so scared to loan money, that risk, once priced at nearly nothing, is now so extremely priced, no one could ever hope to pay what is asked for the money, let alone agree how much domino the ghost of domino number 1 is worth.
by some estimates the number of dominoes derived in essence from a single original dominoe world wide ranges between 48 to 100 trillion dollars. if in fact you could document all the domnoes and their order of standing, or even prove such a thing.
at this stage of the unwinding, we are at about domino number 8 or 9. only a trillion or two has gone to money heaven, never to return. chump change compared to the losses yet to occur as all the dominos call each other up (margin call) and ask for their money, which simply, does not exist, or so little of it does exist, as to equal pennies for hundred dollar bills.
how's that sound??????? |
