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Unpopular Ideas

Ramblings and Digressions from out of left field, and beyond....

Location: Piedmont of Virginia, United States

All human history, and just about everything else as well, consists of a never-ending struggle against ignorance.

Wednesday, March 25, 2009

The Good Ol' CDS's Reprised, re: AIG

George Soros is a man who has a LOT of money, yet he cannot be well-liked by the Haves of the U.S. and the world. He has used some of it to support progressive causes. That is not liked by the Haves, and they probably consider it to be high treachery, because he is nominally one of them.

He could well be the same George Soros who has an essay running in the Financial Times and the Alternet titled "We Need to Regulate the Instruments That Took AIG Down." And its very first sentence was a clear winner in more than one sense. It read: AIG failed because it sold large amounts of credit default swaps (CDS) without properly offsetting or covering their positions.

Though I know nothing about credit default swaps, that hasn't stopped me from approaching that subject in not one but several posts, in the attempt to get to the place where I will know something about them, though I can't be sure that I really want to know anything at all about them.

--Except that I do know this. They fail one critical economics test that I've known about and applied ever since the age of about seven. They are not something solid to the hand that I would send off Ralston boxtops to get, as I did for various valuable items at the urging of the Tom Mix shows in radio's Golden Age.

Actually I doubt that very many other people know even as little I do about credit default swaps. And I would go farther. I could add that everything the Big Money experts say when they sound so authoritative about those and the numerous other "instruments" of their world is really just more of that high-sounding bullpoop that people in high finance use either to cloak what they are doing or to hide the fact that they themselves don't truly know what all those big money shenanigans are really about.

I hoped that all the money that George Soros has and the fact that he has spent at least a little of it wisely meant that he does know just what he's talking about and that he was going to lay something out clearly here. And he surely does know, but the problem was that that opening sentence, sadly. was almost the last reasonably comprehensible statement in his essay, and he spent the rest of the time "covering his position," using the seemingly unavoidable financial verbiage that was not at all transparent to my very limited economic understanding. (I would call it "ignorance" if I didn't believe that in that inability I have whole nations of company, even others with PBK keys.)

However, I did manage to gather that he doesn't approve of credit default swaps, and he called them "toxic." But. alas, he didn't call for them to be wired to concrete blocks and dumped en masse into the East River,. which is my gut feeling and I think the most meaningful cure for the whole financial malaise. Instead he said they had one small use, which sounded so devoid of being of any real use to anyone who still finds pennies among his change when he empties his pockets on the bureau that I figured it wasn't something that I could take to the bank.

In all, I highly recommend studying that article.


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