正文
I don't see junk paper in there anywhere, nor do I see liens onhelicopters. The Fed is getting net worth when it gets collateral. TheMBS's acquired were investment grade and the best I can tell, mostlikely obligations eligible for FNMA purchase. The entire agreementyesterday encompasses assets that are well below a years interest atthe Fed. If it went to pot 100%, it would be cancelled in less than ayear.
THERE ARE SOME OTHER QUESTIONS, THAT I THINK MIGHT GO A LONG WAY TO ANSWERING THIS MESS
Thenumber one thing that people miss when discussing this subject is whatis really monetary net worth? I think it is the amount of assets leftthat are liquidatable after the amount of bank credit is taken out ofthe equation. The idea that anyone has a certain amount of monetarywealth is elusive. Even if we were dealing with gold and banking, theamount of true wealth in the system would be far less than the amountof socalled gold credit. We might all have a bank balance and for thatmatter it might all lie in one account, meaning one guy has it all.But, the best he is going to do is get all the gold and all the titlesthe banking system holds. Truth is he is going to lose. Thus the onlyway a gold system with banking works is with runs on the banks. In anycase, what actually belongs on the outside is far less than whatappears to be on the outside.
This is where the whole mess isgoing to implode. What do you think the net worth of all the peoplethat have bank balances in excess of $10,000 is? My guess is it is manyhundreds of billions and probably even trillions in excess of whatcould actually be there. In an indirect way, the owners of deposits ownthe equity of all the homes in the US, though the equity might actuallybe in the name of some poor debtor. Of course that includes their ownhomes and it excludes the homes of poor people who don't owe amortgage. We might all be surprised how many poor people actually owntheir homes without debt against how many middle class high paidAmericans have pledged every dime of equity.
In any case, thetrue net worth of these assets on the outside have more to do with howstrong the push of credit is to keep up the price. If the banks gobroke, then the amount of money that can actually be given to thedepositors is limited to the lost net worth of the bank. That is reallyall that is there. Of course there is the collateral which is actuallythe roof over the heads of the majority of people in the US, which willbe used to as best can be expected, prop up the value of the remainingdeposits. The automobile loans are literally worthless, as cars arejunk by the time a depression ends. The credit card debt is never paid.Thus, who really has the collateral?
Again, if we wereoperating on gold, the banks would be burned down or raided until allthe gold was gone. That would likely be no more than the equivalent of20% of the deposits and likely all the banks net worth. All the moneyto buy the collateralized assets to fund the other 80% would be the 20%gold backing. The same is true if they were using wooden nickels asmoney. This may sound absurd, but the collateral for the loans is thereal money and the net worth of the institution is the rest of thestory. YOu can't walk off with more than the net worth of theinstitution and the rest is deflated.
Thus, the net worth hasto fall for the entire economy. This is a mathematical necessity. Thewhole game must be liquidated. If I am taking MBS's as collateral, Imight not get 100% of par, but I am going to get more than if I had abank account. The real theory of paying back money is it can only bepaid back by those that possess it. Thus, the insured accounts theoryis that you keep your money in the bank and let the value of thecollateral restore the accounts. Otherwise, only the depositors havethe money to pay the claims. The money came from people that couldn'tpay it back borrowing it and the only way the depositor got the moneywas in exchange directly or indirectly with one of these people.
THERE ARE SOME OTHER QUESTIONS, THAT I THINK MIGHT GO A LONG WAY TO ANSWERING THIS MESS
Thenumber one thing that people miss when discussing this subject is whatis really monetary net worth? I think it is the amount of assets leftthat are liquidatable after the amount of bank credit is taken out ofthe equation. The idea that anyone has a certain amount of monetarywealth is elusive. Even if we were dealing with gold and banking, theamount of true wealth in the system would be far less than the amountof socalled gold credit. We might all have a bank balance and for thatmatter it might all lie in one account, meaning one guy has it all.But, the best he is going to do is get all the gold and all the titlesthe banking system holds. Truth is he is going to lose. Thus the onlyway a gold system with banking works is with runs on the banks. In anycase, what actually belongs on the outside is far less than whatappears to be on the outside.
This is where the whole mess isgoing to implode. What do you think the net worth of all the peoplethat have bank balances in excess of $10,000 is? My guess is it is manyhundreds of billions and probably even trillions in excess of whatcould actually be there. In an indirect way, the owners of deposits ownthe equity of all the homes in the US, though the equity might actuallybe in the name of some poor debtor. Of course that includes their ownhomes and it excludes the homes of poor people who don't owe amortgage. We might all be surprised how many poor people actually owntheir homes without debt against how many middle class high paidAmericans have pledged every dime of equity.
In any case, thetrue net worth of these assets on the outside have more to do with howstrong the push of credit is to keep up the price. If the banks gobroke, then the amount of money that can actually be given to thedepositors is limited to the lost net worth of the bank. That is reallyall that is there. Of course there is the collateral which is actuallythe roof over the heads of the majority of people in the US, which willbe used to as best can be expected, prop up the value of the remainingdeposits. The automobile loans are literally worthless, as cars arejunk by the time a depression ends. The credit card debt is never paid.Thus, who really has the collateral?
Again, if we wereoperating on gold, the banks would be burned down or raided until allthe gold was gone. That would likely be no more than the equivalent of20% of the deposits and likely all the banks net worth. All the moneyto buy the collateralized assets to fund the other 80% would be the 20%gold backing. The same is true if they were using wooden nickels asmoney. This may sound absurd, but the collateral for the loans is thereal money and the net worth of the institution is the rest of thestory. YOu can't walk off with more than the net worth of theinstitution and the rest is deflated.
Thus, the net worth hasto fall for the entire economy. This is a mathematical necessity. Thewhole game must be liquidated. If I am taking MBS's as collateral, Imight not get 100% of par, but I am going to get more than if I had abank account. The real theory of paying back money is it can only bepaid back by those that possess it. Thus, the insured accounts theoryis that you keep your money in the bank and let the value of thecollateral restore the accounts. Otherwise, only the depositors havethe money to pay the claims. The money came from people that couldn'tpay it back borrowing it and the only way the depositor got the moneywas in exchange directly or indirectly with one of these people.
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