let's take a step back eh
Tbh I find this medium rather clumsy as a way of conducting myself, I'm not usually this fragmented.
[I also wrote the original in haste and would have framed that better too, not my best]

OK, re oil prices. Many peak oilers were convinced that the $145+bbl was because we'd hit peak oil, and this was because of below ground factors.

Ilargi and Stoneleigh predicted that oil would drop in price when everyone else on the oil drum thought it could only go higher.

They put a temporary bottom under the fall oct 07 - march 09 - and predict a sucker rally from March till this Autumn. Yeah people get rich in sucker rallies, the first ones in and the first out.

I don't understand why you don't see that CDoing a subprime, and then CDO2ing that and then leveraging that 'asset' at anywhere between 25 and 80:1 is not the ragged bottom of the debt pyramid. It's effectively counterfeiting money. The 'asset' is not pegged to good quality reliable payers, we've run out of those.

Perhaps we're talking about different pyramids?

Do you disagree with this? www.chrismartenson.com/crashcourse/chapter-8-fed-money-creation

"All of which leads us to the fourth Key Concept, which is that perpetual expansion is a requirement of modern banking.
In fact we can make a rule: Each year, new credit (loans) must be made that at least equal the amount of all the outstanding interest payments that year. Without a continuous expansion of the money supply, past debts would not be able to be serviced, and defaults would ripple through, and possibly destroy, the entire system.
Defaults are the Achilles heel of a debt-based money system, which we saw in our local banking example in the previous chapter. Because of this, all the institutional and political forces in our society are geared towards avoiding this outcome."

.. and we've also got the small matter of $1.5 quadrillion in derivatives to contend with - where's that cash going to come from? Oh. Yeah, I know about the 'ostensibly a zero sum game' bit. But it isn't really, is it?

Oh. P.S. Are you Mr G. Gecko? ;)
(Countryslicker, Wed 22 Jul 2009, 15:55, 1 reply)

Yes it's not an ideal medium for debate. Better for dick jokes and flaming.
Can't argue that much of the financial engineering that went on was massively misguided and very dangerous. Your CDO squared example is particularly egregious. But the issue wasn't the concept itself, but the huge mis-rating that went on. There's no harm in leveraging an asset up to a multiple consistent with its quality; the problems began when those estimations of quality were hugely overstated, leading to more risk than was expected.

We/they have cocked up in truly epic fashion. I suppose the difference in our opinions is that you think it's terminal, and I don't.

I'd comment more but I'm far too busy asset-stripping a family-run airline ;)

All the best!
( Scrumper, Thu 23 Jul 2009, 12:31, closed)

yep
We shall see eh.

Hope for the best, but prepare for the worst, at the very least, get out of debt. Oh, and keep some *real* cash under the bed.

cheers.
(Countryslicker, Thu 23 Jul 2009, 15:35, closed)