Market Meltdown averted- For now

Banker From Monopoly

The fed has helped in averting a chain reaction that could have caused a meltdown in the markets. 

Bear Stearns made a lot of very risky investments in the derivative markets.  About 14 Trillion worth.  Holy crap.  $14,000,000,000,000.  Apparently, the fed pumped in the money to stabilize those investments.  The fed encourages risky behavior, and then proceeds to rescue big business from the results of that behavior.  All you have to do is put yourself in a position that if you go down, you take others with you.   It has almost become an art.  Who ever has the connections and the best sob story is insulated from disaster.  We are in what is becoming an Aristocracy of pull (thanks frisco).  It will be painful to live through the results, but we continue to placate the foolish, putting off the crisis, but ensuring that it will be worse.  I read that this happening after the S & L crisis in the 80’s proves that people don’t learn.  On the other hand, I think it proves that people learn very well.  Get deep into risky business, and tie others to you, and you are set.

Trading derivatives was once a vehicle that people used to eliminate future risks.  Farmers and food manufacturers traded corn and heat futures.  Miners, smelters, and steel companies traded metal commodities.  People used these to plan for the future, and make deals in advance.

Today, there is over $500,000,000,000,000 (not a typo) worth of derivatives in existence.  That is greater than the world’s wealth.  Instead of the stock market beign a place for people to enjoy partial ownership of large companies, it is the worlds largest casino.  Commodities markets are often worse.

We have been shuffling money around long enough, it is time for us to get back to producing wealth. 

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