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Strategies & Market Trends : The coming US dollar crisis
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To: Metacomet who wrote (26569)1/27/2010 5:11:10 PM
From: Real Man  Read Replies (2) of 71475
 
They were following models, not orders. The models work while
liquidity is present. Once markets become illiquid, they break
down, resulting in huge losses. They were taught models in
business school. They were not taught about the breakdown.
They were taught the Fed will always ensure there is none,
so they offloaded all risk on the system through derivatives,
and the system blew up. They had no idea they will blow up...
some didn't. Those banks blew up. Others got a big payment
as the Fed had to become the ultimate counterparty. They
really had no choice, and indeed prevented a systemic
meltdown. For now, unfortunately.

rotman.utoronto.ca
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