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What writers write when they 1) aren't writing, 2) are avoiding writing or 3) need a word count to convince their spouses they are writing.

Origami n' Stuff 4 Kids

Tuesday, February 10, 2009

weapons of mass destruction...

I've been trying to understand derivatives and hedge funds, and feeling like an idiot. At least I'm in good company--billionaire George Soros avoided them because he didn't "really understand how they work," and Buffet called them "financial weapons of mass destruction."



Sean Gonsalves, syndicated columnist and news editor with the Cape Cod Times writes:

It's kinda like playing craps at the casino, where instead of gamblers betting on the dice-roller to crap-out, with derivatives, investors are betting on whether a creditor is going to go under. But instead of buying chips, the lender buys risk-insurance and makes a "swap" with a third-party. If the borrower doesn't pay the loan back, the lender loses the loan but collects the insurance.

That's rather simplistic, but when you consider the $500 trillion derivatives bubble as compared to the $50 trillion world GDP (World Bank, International Monetary Fund), it's astounding.




Really now, is anyone following what that guy is saying? I'm sure not. I need the Idiot's Guide version:

idiots guide to subprime

1 comment:

  1. Hi! It's a very informative post.Its nice to read an useful article for beginner like me.It's very interesting.Thanks a lot.Keep blogging.

    ReplyDelete



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