Old News is Sometimes Good News

I was taking a look at old SpoVegas stuff  (the pre-hyphen era) and realized that one of my last big columns was an explication of how there wasn’t really anything to this whole “subprime mortgage” problem. Even with all the foreclosures out there, the direct economic impact of foreclosures alone would not have had the current effect on our economy without the disastorous bets of wall street hedgers. It was the bundling and insurance and hedging on top of bundling and insurance that put us where we are. Looking at the fundamentals, the fall of investment banks and major insurers due to a fairly minor rise in foreclosures makes no sense.

But when you start to look at the life of sophisticated financial instruments that require various bets to be paid, or should I say insurance contracts to be covered with cash, when housing prices rise or fall, then you can begin to understand the crumble of AIG or Lehman Brothers or our entire country.

When John McCain said that the fundamentals of the economy are strong he sounded like a tone deaf idiot. But he was just looking at the fundamentals, and failed to notice that half of our economic paper money was being bet on a casino table and was about to bring us to a serious situation. Perhaps we did what we needed to do. But now we need to just label most “investments” as the gambling they really are and go about our lives. We should outlaw secondary betting (beyond the holders of the original asset) in the same way we outlaw life insurance purchases or payments by those outside of a certain circle (to prevent controlled killing collections I’d assume).

Also known as common sense. My old analysis sounds irresonsible, stupid, and tone deaf. But I was right on, I just didn’t know that the future of our country was being bet on splitting  pair of 8′s against a dealers ten.