The real risk is in the credit derivatives market

I first started hearing about credit derivatives a couple of years ago, around the same time I started hearing about how there was a looming mortgage crisis. If you want to scare the hell out of yourself, go read this article over on financialsense.com. It will take a while to work through it but it’s a great distillation of what’s going on in our capital markets right now and where this might lead us. I could sum it up in a couple of ways – a) it’s all a giant fucking ponzi scheme that deregulation facilitated and b) the risk in credit derivatives makes the subprime mortgage crisis look like paperoute money. We’re talking 10’s of trillions of dollars here.

Even trying as I am to understand all of this I really don’t feel like I have a handle on it. Still, I will say my gut tells me that dropping 700 billion into the markets as is being proposed isn’t going to do anything except possibly stave off the inevitable. From what I’m reading our capital markets and indeed the entire underpinnings of our economic system are profoundly broken. Propping up these cancerous institutions doesn’t fix the problem, it just keeps the patient on life support while it spreads its disease further.

Anyone counting themselves a citizen should be reading up on this stuff. There’s a wonderful irony to all this, in this season of campaigns promising change: all signs point towards us getting change all right, change so radical it’ll shock all of us, only it has almost nothing directly to do with our political candidates.

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