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Wall Street Crisis (III).
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If you wanted to understand how the world got into this mess in a simple “man-in-the-street” explanation, two British comedians (=中国相声) in 2007 before anyone has even heard of the crisis did a comedy sketch that nailed it. You Go to http://brasschecktv.com. You don’t have to register just click on the video. For people not used to British accents and fast talking dialogs, this video may require repeated viewing. But it is really a gem. No one of the current talking heads on TV has done a better job of explanation after the fact and certainly not nearly as entertaining and funny. If these two comedians had further seen the insurance scam that is known as credit default swaps (CDS) built on top of this house of cards, they would really be geniuses.
(Note: CDSs are“insurance contracts”written by companies such as AIG and others that supposed to guarantee payment if those sub-prime mortgages ever gets into trouble. Except nobody ever thought that they may have to payoff on these contracts. It is like selling life insurance when you think everyone will live forever. By calling such insurance contract “swaps”, issuer avoid insurance regulation that require asset backing for each insurance contract written. A total of 52 trillion worth of such “contract” were written. This is larger than all the GDP of all the developed countries (US GDP is only 10 trillion). For a time it is pure profit until the house come crashing down.
I have said this before: "The elements of Financial Engineering are actually relatively simple. It is human greed that knows no end and never learns. "
https://blog.sciencenet.cn/blog-1565-43553.html
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