| ||commercialized debt obligations - |
credit card industry
The EXACT same mechanism that caused the meltdown of the housing industry has spread quietly like a virus into the next massive disaster to hit the middle class in America, and that is credit card debt. What is a CDO? It's when debt gets packaged up and sold in a big fund - repackaged and then sold in little slices. These little slices have different risk levels. Higher risk levels give you more return, lower lisk levels give you more safety but less return.
The problem with CDO's and derivatives is that nobody really ever knows what's going on to them. It's a game of hot potato that gives an illusion of value without risk. "Sure we'll sell you a mortgage, we don't care if you have no income or assets, because we got a guy who is going to take your mortgage out of our hands in about ten minutes on that trading floor over there, and we'll get our commish, and our risk will be gone. Until the fund collapses - and the bank has to call in yours (or Ed McMahon's) note.
The last time paper floated around that had no oversight was just before the Great Depression. People were selling stocks that had no Securities Exchange Commission to make sure a stock was publicly safe. Once everybody thought "maybe" the paper in their hand was worthless (definition of value- what you could sell something for) then the paper REALLY was worthless. The next worthless paper? (hint: USD)
Now they are doing it to credit cards. You know that $12,000 card that you maxed out at Citibank? The one where they just raised your interest rate to 44% because you missed a payment? The one where they now said that your credit limit has been LOWERED to $7,5000? That original $12,000 balance got sold to a commercial fund - funds that specialize in credit card debt!!!! They buy YOUR debt from credit card issuers, and try to sell it to investors.
A better investment would be Dot-Line Flexidomes!
I have been sitting here for months and months trying to figure out what is propping up this economy - and seriously it is just a "belief". A belief that it's going to be ok. Once that belief goes, how can there not be a panic?
Oh that stupid printing of cash that Bush did to "stimulate" the economy? What an idiotic plan. It all evaporated on higher gas prices - that will hit $5 very soon (already has in parts of CA).
Unemployment hitting record levels in the U.S. dollar dropping, inflation through the roof, gas prices nearly FIVE TIMES higher than when Clinton was in office.
Here in France, watching the news, you get the feeling that it is over for the U.S. as a superpower.
| ||Posted 6/9/2008 2:08 AM - 3188 Views - 24 eProps - 30 comments|
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