tag:blogger.com,1999:blog-7820485130017459619.post5310412200723681635..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: Economic Crisis - The Eye of the Hurricane before the 'Service Economy' CollapsesUnknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7820485130017459619.post-49772513752042458192008-10-24T01:11:00.000-07:002008-10-24T01:11:00.000-07:00Thanks for an extremely interesting and thought-p...Thanks for an extremely interesting and thought-provoking blog. I really hope that your direst predictions are wrong. Please excuse the naivety of my question - I'm not an economist.<BR/><BR/>Following on from Lemming regarding China stopping lending, surely the consequences for them will be a lot worse if they do suddenly stop? Your link points to an article that indicates that the Chinese authorities are trying to stimulate exports by increasing export tax rebates; surely if the West's economies & currencies collapsed it would make it even more difficult for China to compete in the world markets, as well as destroying their potential markets for an even longer period?<BR/><BR/>Like a bank lending to a business, I can see that it's in their interest long-term to stop lending so much to the West but surely it would be in their own interest to stop lending gradually, rather than suddenly, so they can recoup at least a portion of their previous lending?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-76557132818595112232008-10-24T00:09:00.000-07:002008-10-24T00:09:00.000-07:00The economic crises someway effect the the UK as w...The economic crises someway effect the the UK as will,i'ts global virus,<BR/>there is more information...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-30873030988421444082008-10-23T10:05:00.000-07:002008-10-23T10:05:00.000-07:00Mark,Thanks for your kind comments. Insurance has ...Mark,<BR/><BR/>Thanks for your kind comments. Insurance has been around for hundreds of years and plays a valid role in society. Hell, I've spent countless thousands on various insurance policies in my life and (thankfully) have never had to make any claims (with an exception of some j###ks stealing the hard top from my convertible)<BR/><BR/>There are absolutely valid reasons why insurance is regulated the way it is. If insurance was as unregulated as CDSs, there would be nothing to stop me from taking out multiple insurance policies on my Ford Fiesta (or getting friends and family to do so), and upgrading to a Mercedes after I totaled the former. I mean, why else would a "disinterested" party want to take out "insurance" against an event that has no financial impact on that party except conspiracy or insider information?<BR/><BR/>Having said that, I think the 65 trillion USD CDS problem will be solved simply by the US government declaring all such contracts "null and void". The few who used these contracts as a "real" form of insurance will learn to get proper insurance in the future...<BR/><BR/>All the bestAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-51925447855873289872008-10-23T07:59:00.000-07:002008-10-23T07:59:00.000-07:00I'm glad that the question of Credit Default Swaps...I'm glad that the question of Credit Default Swaps is as confusing to others as it is to me. <BR/><BR/>The way I was thinking of it was that if a million people each place a bet of one GBP on a million-to-one event happening e.g. aliens land in London, and it does occur, then if the bookies go bankrupt the total effect on the country is minimal, even though, in one sense, a trillion pounds has just disappeared. <BR/><BR/>Is that a valid way of looking at it?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-57082283542534728692008-10-23T01:25:00.000-07:002008-10-23T01:25:00.000-07:00Credit Default Swaps are not insurance (otherwise ...Credit Default Swaps are not insurance (otherwise they wouldn't be called CDSs). If I insure my house for 400k and it burns down, my insurer stands to lose 400k. With CDSs it is different - there is no requirement that the party taking out the "insurance" has anything to lose from the house burning down and there is no limit to the number of people who can participate. So for example a hundred different people can buy CDS-like "insurance" for my house and if it burns down, the counterparties are on the line for a total payout of 40 million against the loss of a single 400k house.<BR/><BR/>CDSs are unregulated private contracts, there is no central clearing house for them and so nobody knows how many of them are out there, who holds them and what the real exposure to them is. They are truly evil and toxic and I guess they are the next bomb to go off in the financial world. Some say that the last wave of bank collapses/nationalizations was triggered by the CDS situation brought upon by Lehman Bros. going bust.<BR/><BR/>Thanks for the very interesting comments you posted recently.Anonymousnoreply@blogger.com