Rons sound money policies

[Johnnybags]

will be the mantra going forward, the banks are getting crushed, foreclosures up 799% in LA, and funny money private equity deals are frozen in time, no financing available. In a few weeks or months many people will be looking for an alternative, even the Wall st bank employees, who have seen their investments in company 401k plans at the banks crushed. No other politician ever warns of these facts other than Ron. Unforunately the more calamities that show up the better for Ron.

[freelance]

Oh yeah, and there's that little Hedge Fund problem--two down, how many more to go?

[MsDoodahs]

Can someone who has a really good grounding in this area PLEASE try to do a quick break down of it that will work for your less than average to average american brain?

I've tried but I have not been able to do it.

I've seen people's eyes glaze over as they tried to follow my explanations. :o

[Johnnybags]

going to do? He is boxed in and dangerous. I have never seen a strong economy led by oil and military companies only? No wonder he wants wars, or he will be the Hoover of our times, he is spending trillions we do not have, oh we will be paying for this forever by reducing the standard of living thru inflation and wage suppression. Ouch! Stagflation.

[Johnnybags]

I'll try in John Q lingo

[freelance]

Johnnybags, can you also explain how the derivatives blow up is going to affect things? I've read all about it, I understand it just enough to get myself into trouble trying to explain it. Thanks.

The one thing that I can explain succinctly is this. If China decides one day to quit financing our adventures, we are screwed! They put money into our economy by buying our worthless bonds. Do you remember hearing about War Bonds? That's how we have financed some of our wars in the past--through our own faith in the govt. repaying those bonds that the public financed. This time, China is financing our wars.

[Johnnybags]

to explain derivatives blowup is a big margin call due to the collateral become less valuable, banks ask for more collateral, at 40-1 leverage it takes a small loss to wipe out the original investment. The margin call is due to lowered ratings and the fact that the prediction models never envisioned so many defaults on the underlying mortgages. The result is since the leverage used was huge most are being wiped out and instead of putting up more to meet margin, they are selling the assets at well below Model price. For John Q its like making a big bet in your broker account and when he asks for more you do not pay, he sells it, but a broker account has safeguards called maintainence, there was no maintenence on these derivatives because they priced them at what they wanted with the help of ratings agencies. Now that many are valueless or close, you cannot get blood from a stone. You know own the junk instead. And of course there is a massive snowball effect on world liquidity. Also since many large investors like pension funds cannot hold under say AAA rated stuff, when these ratings get cut, they sell. Consider now that Goldman could not peddle Chrysler bonds now and since they bridgeloaned the cash for the transaction they now own a large chunk of Chrysler unless and until they sell it, obviously at far worse terms and liklely losing. Otherwise GS is now in the car business. One example of many to come. Or even simpler the banks made credit card loans to hedge funds based on a phoney income/asset statement and now the hedgies are runnin away.