there is about $20 trillion in derivative paper sitting on top of subprime mortgages
there is another $400+ trillion in derivative paper based on interest rates, price of energy, price of gold, etc ($700 trillion is the highest number I have seen)
this worthless paper trash has been sold to an unsuspecting body of investors who are now waking up to this fact:
ALL OF THIS PAPER IS WORTHLESS TRASH!!!
the trick now is to monetize this paper without making it obvious to the public
I personally don’t think it is possible – there is just too much of this toxic crap floating around – but the bankers are going to try to do it – they will do it in little pieces here and there in the hopes that the sheeple don’t notice
this is what it will look like: $100 Bil for a new subprime fund, expand Freddie and Fannie’s loan limits and portfolio size limit, lower the standards for mortgages that Freddie and Fannie can buy, lower the standards for the paper that the Fed will accept in its repurchase agreements, create ‘rescue’ plans for F’d home-debtors, lots more to come and lots more being done behind the curtains
we humans continue to repeat the fiat currency mistake and it bites us in the ass every time – welcome to the latest ass-biting
“one of the ways for a central bank to stave off credit contraction and deflation is to directly monetize paper assets – in simplified terms this means using printing press money to buy worthless paper assets instead of letting those assets meet the price discovery process in an open market”
