I’d like to focus this blog on what is happening right now and share useful financial advice. Sometimes I might share broader advice than that, but right now I feel that’s where my knowledge is. History and an understanding of how everything works is surely important, but I honestly don’t have the time to cover it all. There are so many excellent blogs, homepages and Youtube videos that cover just that, and I think we’re all better off if everyone sticks to what he or she knows best. I can give you a brief history on how we got into this latest mess though:
To put it simply, the bankers have been raping the public for a really long time and they simply took it to whole new hol…level lately. Greedy overleveraged banks have sold trillions of dollars of derivatives to municipalities, pension funds and everything in between, promising sweet returns and virtually no risk as they were boasting AAA ratings given by useless rating institutes. Practically anything providing a stream of cash flow could be securitized and financial institutions bought loans just to turn them into financial instruments, sell them on and turn a quick profit. Little did buyers know that many AAA ratings were backed by homeowners, most of them in the States, with almost no down payment and, well, let’s just say you were lucky if your derivative payment stream originated from people with steady jobs. Teaser rates and adjustable-rate mortgages virtually enabled anyone to buy a home, and the banks packed and bundled the mortgages into worthless pieces of paper (also known as mortgage-backed securities – MBS) and spread them around the world with hefty profits. Issuers of MBS had also in many cases, bought insurance against defaults from insurance companies sometimes leveraged more than a 100 to 1. Needless to say it was anything but a stable and sound environment, and when rates started to go up and people lost their jobs the whole chain literally broke down.
So here we are now, with institutions around the world that have all these worthless assets on their balance sheets, and instead of letting much of the financial sector go bust and arresting all the crooks (bankers) that got us into this huge mess, moronic or paid-for politicians decided it was a much better deal to bankrupt the nations and taxpayers to save their banker buddies. The only way to keep this mess afloat is the never ending injections of liquidity and low interest rates, ’cause as soon as the money stops pouring into the system, we’ll have a financial collapse that would make the Great Depression of the ’30s look like Ben Bernanke with hair – not too shabby.