Kevin Drum has some really discouraging money thoughts today. I've been thinking much the same - that our financial situation is really much worse and much more tenuous than we've been led to believe. Just a bit of sugar-coating, apparently.
Earlier today I was wondering if the Fed had reduced interest rates so dramatically because it believed things were even worse than the rest of us thought. I guess so: "Losses from sub-prime mortgages have far exceeded [...]
Tags: Interest Rates, Sub-Prime Mortgages, Economy
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Satyajit Das (if you don't know the name, he's one of the mathematical whizkids behind derivatives and other financial shenanigans) thinks we're just at the beginning of the crisis.
ReplyDeleteI don't think politicians have the first idea how high-yield financial instruments that are responsible for the seemingly booming economy are based on sub-prime loans, nor do they realize that the risk models that are used to value these are demonstrably bullshit. The leverage involved is crazy, with 30 dollars in loans being made on $1 of actual, physical assets.
If you really want to read something scary, check out the pdf at Das' blog:
http://www.wilmott.com/blogs/satyajitdas/
Das is refreshingly cynical about the way the economy is run, and he literally wrote the book on financial derivatives, so if he's scared, I'm scared.