Wednesday, May 9, 2012

Better Brush Up On How To Tie A Windsor Knot

Stop The Hands of Time

She was holed up in a small motel room at the edge of the desert, drinking heavily and watching numbers flick by on her laptop.

I waited patiently. In years past, brilliant and powerful men had paid her millions for her insights and opinions. I wondered how she'd downsized from her previous life to a single suitcase, a laptop, and a 19-year-old Ford with a dented fender.

Finally she closed the laptop. And slowly stretched out the word "shit" until it sounded like it had 14 syllables.

"Follow the money," she told me.

So I did.

Here's what I found:

There is a completely unregulated pool of Credit Default Swaps that is gigantic. It's hard to know exactly how big since there's no regulation (and no requirements for reserves and no way to accurately set prices), but experts estimate it's between 800 and 1,200 trillion dollars.

That amount is hard to fathom.

So let me put it another way.

The total annual value of everything in the world is about $50 trillion.

So the amount of outstanding Credit Default Swaps is 16 to 24 years worth of everything in the entire world.

So what happens if someone has to start paying off large numbers of those Credit Default Swaps?

I couldn't imagine, so I went back to the motel room. I'd ask her. Certainly she'd know.

The Ford with the dented fender wasn't there. And her door was open.

Empty liquor bottles littered the floor. But the suitcase wasn't there and she was clearly gone.

All she left behind was a small note. It read "We are all fucked."

1 comment:

Anonymous said...

Every once in a while I remember that you were an Econ major in college. It made little sense then and makes little sense now.