Due to the latest mortgage crisis, the ensuing failed lending institutions, the Fed cranking up the printing presses, the multi-billion dollar bail outs on the tax payers dime. . . . I have to educate myself in the oh so entertaining world of economics. I never took a class in it when I was in high school or college. I wasn't interested. I wasn't going to be a banker, a broker, an executive of an insurance company, a politician, a professor of economics, etc. etc. I just want to be able to balance my check book, make a monthly budget, and save enough money so I won't have to eat cat food when I'm 65. I hate cat food . . . I'm not even all that fond of cats.
So, today I find myself delving into the murky waters of our financial system and practices. What my crash course has revealed makes my stomach turn. Before I go into this in more detail - understand that I think we are fucked. I mean royally!! Early predictions of hard times a commin' have been greatly under estimated.
Ever heard of MBS's? Mortgage Backed Securities., the dirty little secret that has added untold trillions to the already 6 to 12 trillion dollars of debt carried by our failed financial institutions. We don't know the exact amount because, these little transactions aren't monitored by any government agencies. In essence they are hedging devices to immunize a loan portfolio against interest rate risk. They are formed by dividing cash flow from a pool of mortgages.
(Does your head hurt yet?)
Banks and financial institutions all over the world are deeply vested in MSB's and other "side bets" in the mortgage world. A percentage of these "side bets" are on mortgage loans that are predicted to go into default. These guys hedge all their bets . . .right down to the million dollar parachutes when the jig is up.
So, Fannie and Freddie has been taken over by the Fed. AIG who insures Fannie and Freddie, gets an $85 billion dollar Treasury bail out to keep it from going belly up. We're being told that this is just the beginning. If that's the case, nothing congress can do in the way of bail outs is going to save us from the crapper. Even if we start selling off our gold reserves, it's not enough. We are bankrupt! I can balance a check book.
Now the band aid being put on this open wound by our government, is a merely a stop gap measure that will prevent a complete collapse for a while. I hope I'm wrong, I wish I knew what could be done but, I feel that by this time next year we'll have sky rocketing inflation, record high unemployment, and no way for the average citizen to attain a loan for a home or a small business.
I'm leery of the timing of all this. Is this just a scorched earth policy by those who got us into this mess and are heading for the hills, or is this just the beginning of their end game?
DaG out
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