The Only Option is to Pretend
I was disappointed that I could not get a concerted response to my question from last night about what exactly is the "crisis" we are trying to avoid. I found a UK article that is all doom and gloom as things pertain to derivatives:
But this article too is lacking in any real detail. I think that the problem is that nobody really has an idea what could happen. Which I guess is sort of ironic, think of it this way;
- Due to massive leverage, fractional reserve lending, and derivative contracts in the TRILLION dollar range there is no practical way for the actual assets that all these things are built on to pay for the myriad of paper written against such a small hard asset base. The entire system is in fact a fictional notion that exists nowhere in reality. It is therefore in EVERYBODY"S best interest to continue the fantasy world where this stuff all makes sense.
Hilarious really. Only brilliant minds like those in finance could have brought the world to a place where pretend is the only option.
Maybe it is because I am a scientist, or maybe it is my zero tolerance for fakeness, but it just makes me sick to think about things this way. Steve Forbes himself is out extolling the virtues of pretending, from Housing Panic: http://housingpanic.blogspot.com/2008/03/steve-forbes-has-massive-brainfart.html
The telegraph article I linked to at the start says that there are over 500 TRILLION dollars in derivative contracts outstanding. Say that 1%, or 5 trillion were totally bogus and would not ever be paid off, that's 5 trillion dollars right there. Think the FED can backstop that? How about 2%? 5%? Oh my god, what about 10%? Still think the FED can print all that up? Talk about pretend!
The banks and the FED seems to be betting that they can just wait out the housing price bust and then all the crap paper they have will magically become full value once again. Based on the acceleration of defaults, I would hazard a guess that they will do no better on this bet than any of the others they have made. Nothing worse than a degenerate gambler that pretends he can win.
The only thing keeping things up right now is that the fools that have bought the enormous amounts of US debt have to pretend they are ever going to get paid back. Those countries have built their entire financial systems on monies owed them by the US. They cannot simply stop pretending and face collapse either. And this presents an attractive opportunity.
I propose we as a nation adopt an aggressive pretend campaign. As long as nobody can stop us or risk a "financial Armageddon" or some other calamity, it would allow us to ramp up our pretend scale to a high new level. The government should newly mint all US citizens millionaires as of May 1st. Every household will be allotted 5 Million dollars on that date. This way we can really all be big time players in the pretend pageant of life. Worried how we are going to pay for it? Why worry, pretend our debts will be repaid and push the paper off onto China and Japan. We KNOW they cannot ever "Mark to Market" our debt, so why worry?
While I am obviously joking, the sad fact is that this system of playing pretend certainly allows for the possibility of such an action. Look at it like this;
- It is widely known that almost every major US bank is technically insolvent if a fair and honest reckoning of their operations are made. That the US financial system is not at an end right now is proof that pretend is a powerful thing. Is it really such a leap to extend the fantasy to a higher level? It is less of a leap than outright collapse, yes?
That is my take. If you are going to have a reality based on pretending, why not really get pretending? Why even bother playing the game if it is in fact false? We should all be millionaires, no billionaires tomorrow. Pretend is FUN!
This video is too funny!
Funny indeed! Here is a Ford motor product.
Have a good night.