"F. George McDuffee" wrote in message
...
On Sat, 11 Oct 2008 15:36:05 -0400, "Ed Huntress"
wrote:
snip

The Spondulick $USV denominated economy appears to dwarf the real
$USR economy. The real GDP is estimated at 13+ trillion [10^12]
$USR per year, while the Spondulick economy is estimated to total
over 10 times that amount [c. 170 trillion [10^12] "$USV"]

John, Ed, and everyone else -- comments?

Couple of things wrong here George.
First, the auction was totally bogus. Nothing more is indicated by the
"benchmark" than the fact that nobody really wanted these things AT ALL.
Losses on credit default swaps are unlikely to exceed three or four percent
even in the worste case without intervention.
Three very reputable auction designers have been working for the last couple
of weeks to model an auction for these assets.
I've seen one of them. In the end, there may never be an actual reverse
auction at all.
Second, none of these derivatives ever created money. Any valuation will be
done the way you would value an insurance policy but in this case there
aren't any reserves to back them up. Not really anyway. There isn't and
probably won't be a market for these products because they simply are not
tradeable securities. They aren't actually coupled directly to an asset.
They are all risk and have the same value that Enron weather futures did.
Third, at worste, the probable loss/liability that they represent as class
is about 2.4 trillion dollars absent government intervention.

In spite of all of the running around like headless chickens claiming this
is some sort of secular event, it isn't.
This happened twice in the last century and while the work out took a little
time and lead to consolidations of the weak and strong players, the world
didn't end then and won't now.

All of this subteranian stuff need to be dragged out into the light -
kicking and screaming if necessary. That sort of transparency isn't going to
happen until the financial institutions involved have a credible assurance
from the regulatory agencies that they won't be "Lehman'd" when they fess
up. THE CURRENT ADMINISTRATION DOES NOT HAVE THE CREDIBILITY TO MAKE SUCH A
REPRESENTATION. They have not, and can't, articulate a policy that is any
more coherent that our ignorant boob of a President, Mr. Bush.

As a practical matter, this is a seperate issue economically.
The downturn in consumer spending that is underway is the real problem.
It isn't the "Spondulick economy".

It's a little odd to be faced with an election that represents a clear
choice between two models but it is exactly that way.
McCain/Palin is a vote for Phil Graham at Treasury and a year from now we
will be looking at the DOW at 5500 with 15 percent unemployment. Graham will
run around buying up toxic vapours with the expectation that saving the
Spondulick economy will trickle down. Golden Shower economics, if you will
and the US will go through whtat JAPAN went through for a decade or more..
The gap between rich and poor will only widen and that's the real
manifestation of what's been going on. People that actually spend money have
been MAKING less and less of it. They have been operating and living on
borrowed money.People that DON'T spend what they earn have been making more
and more. No credible economist on the planet will rell you that trickle
down works today. Not one. Neither will anyone telling the truth in finance.
It didn't work for Reagan, hasn't worked for Bush and sure as hell never
worked for the vast majority of Americans. The results, were there ever any
real doubt, are in.

Obama Biden, OTOH, is a vote for one of the sharpest groups on the planet
at the financial helm and their stated goal is to put money into the pockets
of the middle class- where it will be spent - at the expense of the holders
of all of the shadow Spondulick owners.
The entire regulatory structure of both America and the world will be torn
up and rewritten to reflec current reality.BooHoo.

Their model will lead to the DOW at about 10,000 a year or so from now, nine
percent unemployment trending down and the biggest public infrastructure and
energy development project project ever undertaken by man. This kind of
public investment is what we have forgone for DECADES and in the end I guess
that's a good thing. A great deal of both public and private money will be
spent but unlike the good money that has gone before and yielded NO VALUE,
we will get a tremendous return on every new dollar invested.Tremendous
numbers of new high paying jobs will be created in the middle class and that
is the basis for a robust and stable economy. It will also have the
advantage of rebuilding America's tax base. It's a self licking ice cream
cone George.

The Spondulick economy will pass like a bad fever and that's sort of what it
is, an infection that transfers wealth from those that create it to those
that don't.

JC