Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

Further regarding the alleged irrelevance of my link....

That we are saying that the 54 Trillion tsunama was never relevant... or is no longer relevant... or "what's 54 trillion dollar tsunami among friends"

As best I can tell, the derivative resolutions were never resolved, but accepted in toto... much as the same way the underlying assets of Freddie and Fannie have never been "resolved".
I believe that the decision not to buy the risk assets that would have stabilized the economy came when the government realized what Warren Buffet told them about in 2002 was really true.

After all of the hullaballoo about derivatives, the nation has pretty much forgotten about them again. The market ignores the problem and there has been no effort... anywhere, to determine what happened or how to fix it.

Maybe Tsunami wasn't the way to describe the situation. Perhaps likening the problem to the potential earthquake that lies under California would be more appropriate.

It is virtually impossible to unravel the derivative swaps, and the longer the financial community can stall, the more responsible parties will disappear into the bushes. As Hedge funds and brokers declare bankruptcy or simply close down, the money that underlies the "securities" becomes even more opaque.

I would suggest that the world has thrown in the towel, and the question:
"How will the financial crisis develop"
will only be answered over a period of many, many years... a period of depression and stagnant economies.

I cannot find a single rational economist who will predict where the world community will find a stable base on which to build any new economy.

Here's the reasonable question that no one can answer. How does one work through a single derivative swap to determine the actual underlying value.

The $54 Trillion number came up at the time that the Lehman accounts were to be resolved. The counterparties who were party to the settlement resolved the process, by agreeing to accept the assets as stated, rather than unwinding the transactions to go to the underlying assets.

I'll listen to other theories on this subject, but at this point, I cling to my original surmise that derivatives are just a variation on the Ponzi Scheme... where the underlying capital that is supposed to be asset base for Freddie, Fannie, Pension Funds, Endowments, Municipal Funds, Insurance Companies, Foundations, Charities, and Brokerage and Market Funds... exists only as shadowy numbers...

...and that those "shadowy numbers" are only given credence as long as they are not required to be converted to cash.

Just as Madoff was never questioned as long as his funds paid off in cash when needed, so too does the financial community continue to perpetuate the derivatives bubble by accepting the assets of the community members.

The single most feared event for the entire world, is what would happen if there was a "run on the bank"... and that extended to all of the economic ties that we all live with.

It started, it's coming.

BTW, has anyone tried tying the stock market numbers to the swings in George Bush's IQ as posted continuously on those
"So and so has a xxx IQ, are you smarter than they are" ads?
Yesterday Bush's IQ was 125, today it's 118, it's never been 92 or 96, not yet anyway.

I'm just wondering if there is a causal relationship, it's gotta be better than getting advice from Wall Street economists.

Are we saying that?

Here's a follow upon my last post, which in essence said that the derivatives in the banks and other financial entity's assets were not liquid Citigroup holds 37 Trillion in "inert" derivatives

Yeah... 37 Trillion... Unwindable derivative instruments. Notional value, true, but with no way to link to the underlying value, the point is moot.

An interesting development reported today. Suggests Citigroup may be giving some thought to consumers, and suggests there are some on Capitol Hill who may be more interested in fixing the mess than grabbing headlines. Fascinating that this has gotten so far with so little attention splashed in the media.

http://tips.blogs.cnn.com/2009/01/08/lawmakers-and-citigroup-reach-deal/

The point did not seem to be moot when you were predicting a financial catastophe as a result of these derivatives.

I am still looking for a clear answer...

What will be the impact of these trillions of dollars of derivatives? Up to this moment, I have understood from previous postings that they would bring about the collapse of the economy... yes...no

What is your opinion about those 54 trillion in derivatives? Is there a 54 trillion tsunami, or not?

Was there ever a 54 trillion dollar tsunami?

If so, what happened to it?

Does it matter?

Did it ever matter?

Did it matter at some time... but stopped mattering?

Honest, Ardy, I don't know the answers to your questions. One thing I do know -- we didn't get wiped out by a 54 Trillion Dollar Tsunami this past October. We got smacked upside the haid with a 54 Trillion Dollar Two By Four, yes. Reeling, but not drowned.

What will come may be a lot worse. I believe, from what I have read, especially what I have read here, that it will be worse. I think a few select people got obscenely rich off of the 54 Trillion Dollar Shell Game, and that it was the biggest baddest scam in the history of fiat currency.

But hey, I'm not an economist. I don't really understand a lot of this stuff. That's why I read a lot more than I write on these economics threads.