How We Roll!!

One thing I am extremely tired of consists of discussion of the Financial Crisis. This article may give the idea of what happened to Interested Parties, and serve as a chronological meter of the Crisis. My only Comment would be a Statement to wit: People conclude that the new Instruments are too complex for Others to understand. I contend that this level of Complexity also precludes the ability to make a Profit. Stated in another way: These Instruments were looking for a Return in Places no one even noticed had to be paid. Debt has to be recognized, before there is any chance of successful Payment. The consequences of this Debt were as null, as the Profits from them. One cannot subscribe to the assumption of Debt, until One understands the Repayment system; unless, of course, One expects to leave the Operation before Repayment becomes an Issue.

Here is the part of the Puzzle where I have my greatest doubts. Everyone talks about Liquidity, which basically means inducements to get financial institutions to loan funds again to the Participants in the economy. The Plan is to buy the ‘Toxic Debt" from the financial institutions, which will incite them to risk their Money again. Here is the Problem: The federal Government may or may not make Money from the Deal–depending on whether they can get the Debtors to repay the Debt. Attempts to force this Repayment will evaporate liquidity in the economy, like the loss of Snow in the Spring Sun. Letting the Debt slide will mean another Trillion Dollars of National Debt, and dry up federal opportunity for future interventions in the economy. Bankers, being sensible people, will notice that their Money is again at Risk if they engage in Toxic lending activities again, and that the federal Government has about reached the end of their own resources. Bankers will examine the Situation, and will prohibit all except the most sound of loans; We being back at the Liquidity Issue.

My Assessment states that Liquidity cannot be found in the Financials themselves, and Business will have to turn to the Equity markets for Cash. The Mortgage Markets will stay dry and mainly without Outside aid, if only the Rain would fall! The federal Government wasted its resources in a Bailout which will effect no change, and magnified their own troubles. The humor for Me lies in the fact that the Economy is not in that bad a Shape, and would have recovered if the Recovery effort had not been launched. One wonders if the economy will sustain the Recovery effort, which imposed its own set of Stresses on the Markets. lgl