About a week or so ago...
a girl i'm dating entrusted me with $200 to safeguard with explicit instructions not to lose it. That's easily understandable enough, right?
You see, it was about a third of her tax refund check and she wanted to make sure we had it when we take our little trip to Asheville in April to go see the Faint in concert.
Well, sure as shit i "lost" it. Well, not really lost, but blew it on a stripper named Racine. Actually i prefer to see it more like i was injecting that money back into the economy by spending it on an eightball and booze enough to convince this lovely little working girl to go have a bit of fun with me. I enjoyed myself... and Racine is in a dumpster somewhere, but i digress.
Suffice to say, my girl was quite pissed when i finally had to admit that i misplaced the money. As we say here in the South, "she really got to cussin' me" over it.
As i tried to explain myself, the conversation went a bit like this:
"Well look honey, that's not as bad as it gets, you know. It was just $200. Thats only 30-something percent of your tax refund."
"Really, well how the fuck is this not as bad as it gets? I trusted you."
"Um, well... over the last year and a half 40% of the worlds wealth has disappeared."
"What the fuck are you talking about asshole?"
"Evaporated into thin air, POOF, it vanished. They're estimating that in the last eighteen months some $11 trillion in household net worth has simply disappeared. Hell, the Times said the world economy may have lost as much as $50 trillion in stock losses, bond write-downs and all the rest. "
"The Washington Times."
"What the fuck do they know, that's a bullshit rag."
"Okay, i'll bite, where did it go?"
"The assholes that made up all this unregulated derivative trading lost it and i don't know where it went or if this money even really existed in the first place. I mean we drive around town and i don't see that these homes have up and vanished a la Poltergeist. Hell, we opened up a full box of Cheerios this morning..."
"Well fuck me silly, it was full wasn't it? We weren't missing half of our Cheerios were we? Hell, you got stuck in traffic today, so i know these cars haven't disappeared off the road.The objects these ideas of wealth are based on haven't disappeared, they've just been revalued to reflect current economic conditions, you know, the bubble burst."
"So where did all that wealth go? And you're still an asshole."
"I don't know. Between dividends, credit default swaps and bundling, sub-prime and derivatives i'm not sure. These companies were unregulated and were not required to have actual assets (fiscal, physical, fiat or otherwise) to cover this insurance they sold twenty and thirty times over on the same swaps."
"Who'd they sell them to?"
"Bitch, i don't know! AIG to Goldman Sachs to JP Morgan to BoA to Wachovia to WaMu to the Chinese to some little Filipino kid sitting at his computer day-trading, who the fuck knows? I guess they had just figured these loans and swaps wouldn't default."
"Well they did."
"Ay, theres the rub. And now AIG, Goldman Sachs, JP Morgan and all the rest might have some magical $130 trillion dollars to cover. Hell, JP Morgan has just $2.2 trillion in actual assets and they might owe out something like $20 trillion."
"Yeah, might as in they don't know how to value these damn things; what the insurance values actually are, what the swaps are worth, whether mark-to-market even matters in these instances. No one knows because some smart-ass young brokers and players and hedge fund managers invented this whole whimsical game. No one knows because they haven't had anything like this before. These damn derivatives didn't exist in this form ten or fifteen years ago. The old bastards running these companies probably didn't understand what these little fuckers were doing, and didn't care either because they were making money hand-over-hooker."
"Whatever, the point is no one knows the value of these things because they aren't real. It might be as much as $130 trillion. Hell, four years ago $50,000 would buy you insurance on derivatives that were worth millions, maybe even tens of millions of dollars."
"Fuck me in the neck!! $130 trillion!!! Does that amount of money even exist?"
"Fuck no it don't exist, it was unregulated trading so it didn't have to exist! And that's were this bailout is going. To AIG and everybody who in turn owes billions upon big-fucking-billions to Deutsch Bank and Societe Generale and all the rest, ad infinitum. "
"Well, why was it unregulated asshole?"
"Hmmm, i see you're still mad at me. I dunno, i guess you can thank the neocons and folks like Phil Gram for that."
"Wasn't he one of the Keating Five?"
"I think so."
"Well, who was buying up insurance on these derivative swaps?"
"Anyone. Third parties especially. Multiple people could buy derivatives on a single swap, even if they didn't have anything to do with the initial loan or the bundling of loans or who it was sold to. It would be like me buying a huge million dollar life insurance policy on you and putting me as the recipient. But i can't do that, because its illegal. Do you know why it's illegal?"
"Because you'd kill me and collect the money?"
"You're damn right i would. Aww i love you baby."
"I'm still pissed at you, you dirty son of a cunt. You went to the titty bar and blew my money didn't you? That was for our trip you asshole."
"No i didn't baby, that's crazy... lemme borrow five bucks for a pack of smokes."
"Fuck off and die."