mick silver
18th October 2010, 03:38 PM
click on link for whole read ... http://www.321gold.com/editorials/moriarty/moriarty101510.html ... I've been pissing and moaning about derivatives since soon after we began the website in 2001. Many times I've made the comment that I thought there might be ten people in the world who actually understand the dangers of $614 trillion dollars in derivatives. I'm probably wrong there; ten may be far too high.
There is a great book out about the subprime crisis and how a very few people actually understood how dangerous it was to slice and dice billions of dollars of subprime mortgages into derivatives. The book is titled, "The Big Short: Inside the Doomsday Machine." Michael Lewis, author of "Liar's Poker" wrote it.
Anyone concerned about the precarious state of the world's financial state should get the book and read it. When I read the book, I was shocked to learn that Wall Street simply didn't get it. They had no idea of the toxic waste they were creating and peddling. They didn't care, if it generated a commission, they sold it, no matter how dangerous.
I think Michael Lewis will be writing another book in a year or so titled, "The Mother of All Shorts." It will be about the stunning and sudden crash in the value of US Treasury Bonds.
We know from reading The Big Short that slicing and dicing subprime mortgages and then bundling them together doesn't add any value to the sum of the whole. If one subprime mortgage is basically garbage, if you bundle $100 million of them together, they are still basically garbage. Alas, the bond rating agencies pretended bundling used toilet paper into giant blocks of used toilet paper somehow made it smell better.
That was a scam and an obvious scam but only to a few. When the heroes of The Big Short started betting against sub-prime mortgages, everyone on Wall Street was thrilled to sell them cheap insurance on what in hindsight was a sure bet on their part. After all, if subprime mortgages by themselves are risky, putting a lot of them in a package is just as risky.
Eventually the government stepped in and bailed out the banks, foreign and domestic and transferred the now putrid bundles of subprime mortgages onto the backs of taxpayers. How they did it is going to create TMOAS or The Mother of All Shorts.
The Federal Reserve, in conjunction with the Treasury simply traded T-Bonds and T-Bills for the crap paper under the theory that trading good paper for bad paper turns the bad paper into good paper. There is a simple error in that logic. Actually the way the real world works is that trading bad paper for good paper morphs the good paper into bad paper.
Think about the basic logic of making giant mortgages to people who have no assets, no job and no credit. Banks did that and repackaged the paper and sold it to other institutions all over the world under the theory that real estate couldn't go down, it only goes up. Well, that theory blew up and taxpayers all over the world are on the hook for the stupidity of both government and banking institutions.
Then think about the stupidity of loaning money to a deadbeat for up to 30 years. We know from various sources that the real debt of the United States is somewhere between $60 trillion and $202 trillion depending on who you want to listen to. That's on an economy of $14 trillion. We have two and a half wars going on right now and the Zionist lobby both Christian and Jewish is doing everything in its power to get us involved in yet another. We stand to gain nothing from any of them except perhaps WW III.
T-Bonds looks as if they peaked back in August. For certain they are in a topping pattern and either we have seen the peak or we will have another blip upwards. Shorting T-Bonds right now is probably the easiest money to make in history. The US government has two choices, they either default on their obligations across the board or they go into hyperinflation. In either case, the value of government obligations is going to zero. And that of course is the entire purpose.
There is a great book out about the subprime crisis and how a very few people actually understood how dangerous it was to slice and dice billions of dollars of subprime mortgages into derivatives. The book is titled, "The Big Short: Inside the Doomsday Machine." Michael Lewis, author of "Liar's Poker" wrote it.
Anyone concerned about the precarious state of the world's financial state should get the book and read it. When I read the book, I was shocked to learn that Wall Street simply didn't get it. They had no idea of the toxic waste they were creating and peddling. They didn't care, if it generated a commission, they sold it, no matter how dangerous.
I think Michael Lewis will be writing another book in a year or so titled, "The Mother of All Shorts." It will be about the stunning and sudden crash in the value of US Treasury Bonds.
We know from reading The Big Short that slicing and dicing subprime mortgages and then bundling them together doesn't add any value to the sum of the whole. If one subprime mortgage is basically garbage, if you bundle $100 million of them together, they are still basically garbage. Alas, the bond rating agencies pretended bundling used toilet paper into giant blocks of used toilet paper somehow made it smell better.
That was a scam and an obvious scam but only to a few. When the heroes of The Big Short started betting against sub-prime mortgages, everyone on Wall Street was thrilled to sell them cheap insurance on what in hindsight was a sure bet on their part. After all, if subprime mortgages by themselves are risky, putting a lot of them in a package is just as risky.
Eventually the government stepped in and bailed out the banks, foreign and domestic and transferred the now putrid bundles of subprime mortgages onto the backs of taxpayers. How they did it is going to create TMOAS or The Mother of All Shorts.
The Federal Reserve, in conjunction with the Treasury simply traded T-Bonds and T-Bills for the crap paper under the theory that trading good paper for bad paper turns the bad paper into good paper. There is a simple error in that logic. Actually the way the real world works is that trading bad paper for good paper morphs the good paper into bad paper.
Think about the basic logic of making giant mortgages to people who have no assets, no job and no credit. Banks did that and repackaged the paper and sold it to other institutions all over the world under the theory that real estate couldn't go down, it only goes up. Well, that theory blew up and taxpayers all over the world are on the hook for the stupidity of both government and banking institutions.
Then think about the stupidity of loaning money to a deadbeat for up to 30 years. We know from various sources that the real debt of the United States is somewhere between $60 trillion and $202 trillion depending on who you want to listen to. That's on an economy of $14 trillion. We have two and a half wars going on right now and the Zionist lobby both Christian and Jewish is doing everything in its power to get us involved in yet another. We stand to gain nothing from any of them except perhaps WW III.
T-Bonds looks as if they peaked back in August. For certain they are in a topping pattern and either we have seen the peak or we will have another blip upwards. Shorting T-Bonds right now is probably the easiest money to make in history. The US government has two choices, they either default on their obligations across the board or they go into hyperinflation. In either case, the value of government obligations is going to zero. And that of course is the entire purpose.