Dan M <[EMAIL PROTECTED]>
> Because I thought I covered that with the cascade effect.
A big part of the recent volatility is due to excessive leverage. That means
excessive lending. If you have 30 to 1 leverage, then the debt far exceeds
the equity. Aren't you the one that likes to look at large causes?
At the end of fiscal 2007, AIG had about $360 billion of long-term- ,
short-term- , and other senior debt. None of those creditors lost any
money despite AIG being on the brink of bankruptcy. They were bailed
out by the government. Similarly, the Bear-Stearns creditors did not lose
money. Ditto for Fannie Mae and Freddie Mac creditors.
I don't understand how you can ignore that in a model of moral
hazard, especially when you just got done arguing that interest rates for
corporate borrowing were either too low or too high or whatever result
your simple model gives.
Look, this is getting silly. If you understand the market so well, and can
consistently outguess millions of people risking their own money,
then why not prove it? Put your money where your mouth is.
Start risking some of your own money, it should be easy for you to
make a lot of money. Then, if you think there isn't enough lending
going on, you can lend! Imagine, actually a direct solution with your
own money rather than taking other people's money and giving it to
people who have made bad decisions.
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