by ReverseEngineer » Mon 22 Sep 2008, 04:50:13
$this->bbcode_second_pass_quote('MrBill', 'I')f current account deficits = current account surpluses. If trade deficits = trade surpluses. If balance of payment deficits = balance of payment surpluses. And they do because they always have to balance.
On PAPER they always have to balance, but you do have the problem of wrongly valued assets which on the balance sheet are valued one way, but in reality may not have that value anymore.
The obvious example is the Suburban Home, with mortgages and Securities backing them which SAY they are worth $200K apiece, but in fact they are worth NOTHING. Well scrap value I suppose, if you want to ship the stuff out of there.
The debt run up here was far more than the wealth of the world at the moment, it was bet on to be more and the monetary supply increased to reflect that. However, when a few players tried to cash out, they found those sub-prime mortgages had no real value as assets. Ooops.
What was represented on paper was not matching the reality, and once that became evident the whole house of cards began to fall apart. Ever bigger organizations had to write down the bad debt, putting their books in the red. So the US Govt, itself in the red is supposed to take on all this bad debt and pay it back? HOW? Its absurd, it cannot be done.
This failure has been building a LONG time, and really NOTHING could have been done to stop it once the first dominoe fell. So you see here the results of greed. Betting on the future, trading at the expense of another. You LOST. So did the rest of the wolrd unfortunately though.
Reverse Engineer