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Politics : RAMTRONIAN's Cache Inn -- Ignore unavailable to you. Want to Upgrade?

To: NightOwl who wrote (14223)	10/5/2008 1:30:21 PM
From: NightOwl	Respond to of 14464

Well... this tail certainly isn't going to be wagging the big dog any time soon: washingtonpost.com I am simply amazed at the ability of the cretin human culture to trump all reason. The more dire the situation... the greater we cling to our "bitter" ideologies... and idolize our little economic delusions. Frankly it reminds me of the modus operandi of the semiconductor industry "clinging" to its delusional rush to spend money it doesn't have to produce worthless IP that can't make money. Nothing matters but the "spice." ...At all costs The Cash must flow. 0\|0

To: NightOwl who wrote (14223)	10/7/2008 4:36:05 AM
From: NightOwl	1 Recommendation Respond to of 14464

Its too early for me to be certain... but with the weak assertions coming out of the EU... the growing and unchallenged call of Wall Street's sales reps for an "open and transparent" market for "standardized" credit default swaps... and the continuing failure of either Presidential campaign to broach the topic... it looks like our future will see the continued domination of the world's economy by gamblers and math-0-magicians trading this Tulip Paper, a/k/a credit default swaps. The probability that Bernanke and Paulson also see this as the only alternative appears to be confirmed by: (1) Their continued focus on a rescue plan which relies primarily on the purchase of bad American debts; and (2) The shear size of the $62 Trillion credit default swap... "industry"... a substantial, albeit unknown, portion of which is directly or indirectly tied to U.S. debt. The only way to save the international institutions that are liable for some Trillions of this Tulip Paper... is to turn all our collateralized "U.S." bad debt into assets with as much value as possible. But to do this they only have $700 Billion and the full faith and credit of the U.S. Thus they will need their "asset acquisition by reverse auction" in order to establish a credible market for the security underlying our bad debt and, by doing so, convince the Tulip Paper holders that the asset values established are in fact credible. That can't be done simply by passing out the $700B to the U.S. firms that issued the non-performing loans. And it certainly can't be done by simply changing an accounting rule. So Paulson's first priority is not to keep U.S. borrowers, employees, companies, or even U.S. investors afloat. His #1 goal is to keep the Tulip Paper holders (all over the world) happy such that the entire Tulip Paper industry keeps chugging along. I have no idea whether or not this quest is possible. Moreover I am fairly certain that Paulson has little more of an idea than I do. But the fact that he's so determined to try tells me that he's terrified of failing to keep the swap market viable. I have no reason to doubt him... so long as there's a chance of avoiding a global default. But equally disturbing to me is a world wherein this insanity continues indefinitely. My experience and instincts... all of them... tell me that so long as institutions are free to engage in such massive side bets on risks presented by other individuals or governments, we're going to have ever larger problems. This credit default swap market is "moral hazard" personified. Indeed the bulk of the market will disappear if all the moral hazard is eliminated. Perhaps even worse... every time a dollar is spent on such useless Tulip Paper... means there's less cash available for investment in other economic activities and sectors. So assuming Paulson succeeds, I won't be happy as long as these swap contracts are permitted. Sure, they could be regulated. But if the rules are effective, their financial attractiveness goes away. They simply serve no economic benefit that merits the trouble and expense of dealing with their risks. Unfortunately, prohibiting them... or some new "innovation" even worse... would require truly massive political capital as well as some uncommonly tight global regulation. I certainly won't be holding my breath... but I won't be investing in any markets as long as this junk exists either. 0\|0