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Teetering on the brink of the new Depression
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handofdave
handofdave
3515 posts

Edited Sep 26, 2008, 16:00
Re: Simple solution?
Sep 26, 2008, 15:55
well, I'm no financial wizard, which is why I live in a modest little house in a broken down town and am constantly on the brink of economic disaster.

But basically, the premise behind all modern financial systems is that they trade in promises. Some promises have collateral to back them up... most do not.

When promises become to big to keep, it destroys the worth of OTHER promises that are riding on the first promise.

In some cases, there are up to 30 levels of promises all relying on each other to keep the economic system inflated.

A series of defaulted debts in this house of cards can play havoc with the whole system, as we're seeing now. The loan makers got overconfident, the borrowers got overconfident, the fragility of the whole mess became too great to stand up and here we are.

The problem with simply allowing Wall Street to collapse is in the history books. It can lead to a general depression.

I'm not so sure this isn't going to happen anyway. There is no real money in this world anymore.. even the bailout is just going to be another grandiose 'promise'- another whopping sum of borrowed money.
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