> About the only good thing about derivatives is they don't
add to debt directly, how about indirectly?
They sure do, and the contribution was substantial. Derivatives
is risk shuffling, so, what was C was sold as AAA due to
somebody's guarantee. Now, that someone was tied to a bunch
of others through derivatives and nettings. Net-net, the
defaulting crap was unloaded on the system with artificially
high rating due to all the guarantees and attached
derivatives. That allowed further debt expansion, which
was for a while supported by rising asset prices, ones
that Ben now is trying desperately to prop.
The reverse process of that is a domino effect through
counterparty defaults, which is why all the bailouts. Due
to that dynamics what used to be AAA and in reality B becomes
C. You get the drift.
After 2008 the Fed and the US government guarantee everything,
and things are not all that different in other developed nations,
so..... this year we had cascading global SHTF scenario. So far
so good, we were spared, but the debt expansion continues. -NG- |
