A Somewhat Hairy Hiatus

I had thought to do this on a two or three day basis, but got called away to Washington to attend a number of meetings. Apologies. It appears that a number of financial chickens have come home to roost, and since I had managed to keep my little credits some distance away from my debits, certain economists and politicians wondered t just how I had accomplished this feat. Particularly at the multi-million level. A meeting of a number of key players was called, and I proceeded to address the meeting.

The address was not particularly well -received.

Perhaps this was because I began with that great economist Charles Dickens, who made the point, I believe in Bleak House, that if income was more than expenditure, the result was happiness. If income was exceeded by expenditure, the result was misery.

From the looks on faces, it appeared that misery was in full sway.

Well what do you expect? I mean, if you're going to offer $400,000 mortgages on houses worth $200,00, then bundle the deals together and sell the packages off in the form of debt that was unaccountably given an AAA rating in terms of eventual return, and then compound the whole mess by re-packaging in the form of swaps, debentures, derivatives or God knows what else, then eventually some institution somewhere is going to default, and suddenly everyone wants their cash back. Only it isn't there.

There is a name for this sort of thing. It is called a Ponzi Scheme, whereby a financial pyramid is created. Now as long as members keep joining, and throwing their money into the pot, those at the top of the pyramid cash in and do very well indeed. When the bottom frays, however, and the incoming funds dry up, the whole thing comes crashing down. And it is not pleasant -- just ask any Albanian.

So in America now, and since a number of global institutions also dove into these murky and dangerous waters, the debt crisis now has international legs.

In several papers, I had warned my financial colleagues that they were sailing in a very leaky ship, but these were laughed at or ignored. What hurt was a comment by one CEO: "Simone's a woman -- what does she know?" This from a twit that, had I a mind to, I could buy his bank out from under him in two hours. Stupid man. I take comfort in Schiller: "Against stupidity, the gods themselves rail in vain."

There is a way out, but that is for another day.