Treasures from the threads -number twenty-nine

From a comment to Simon Heffer's well-stated column in this morning's Daily Telegraph, linked here:

emmiem

on January 10, 2009

at 08:14 AM

.....The banks have lost their capital with massive write-downs, are basically insolvent and have no idea what their liabilities might be due to the impossibility of pricing the monstrous pile of toxic derivative securities, CDO's, MBS, etc, sliced, diced then repackaged and traded with abandon in the heyday of perpetually expanding bubbles. Most of them ended up with European banks. The BIS (Bank for International Settlements), estimates the total might be $1.6 quadrillion with an optimistic firesale value of pennies on the dollar/pound.. if any buyers can be found. A security is only worth what a buyer is prepared to pay, hence the difficulty in estimating value. Brown is not that much interested in savings or diminishing capital for private investors. Our fiat financial system is totally reliant on ever expanding infinite debt as evidenced by the need for year on year exponentially increasing GDP. To re-inflate the bubble he must get banks to lend so that we are persuaded to take on more debt in order to consume more goods from businesses that are themselves in debt. (Blog editor's emphasis) How he will achieve this I do not know. He may in the end have to resort to creating the debt on our behalf in the form of a huge national public works program which will boost yet more publicly funded jobs but do zilch for the economy. Or he may have to nationalize the entire housing stock by buying up all mortgages, in which case he will bankrupt the country. Whatever he decides at some point he will have to concede that our fiat currency is well beyond its sell by date and we are witnessing its death throes. I see a new currency on the horizon (world currency?), or a global return to the gold standard with a coordinated devaluation of all currencies. I also have a nasty feeling this entire financial fandango was deliberately engineered.