Yikes! It's a Dow-dropping-subprime-panic-triple A-summer-meltdown. Jim Juback at MSN Money explains the reasons behind the latest Wall Street wipe out in language you don't have to be Ben Bernanke to understand:
How did all this happen? As any good con man will tell you, the success of a con depends on the mark wanting to believe. The victim, in essence, talks himself into getting fleeced.
In this case, the global investment community wanted to believe that Wall Street and other centers of financial engineering could manufacture investment-grade, long-term debt to meet the huge demand of insurance companies, pension funds and central governments for predictable, long-lived and safe interest-paying investments. Because the need for this paper was so great, these marks were willing to suspend belief. They knew in their heads that you can't manufacture investment-grade debt. But in their hearts they wanted to believe. They needed to believe. They had to believe.
Because, you see, it's the only way out for an aging world that's running a huge shortage of the real stuff. So investors were all too willing to buy fake investment-grade paper -- at prices commanded by the real investment-grade stuff -- until finally the con was revealed as assets were marked to market at 50% or less of their assumed value."
Yikes! It's a Dow-dropping-subprime-panic-triple A-summer-meltdown. Jim Juback at MSN Money explains the reasons behind the latest Wall Street wipe out in language you don't have to be Ben Bernanke to understand:
How did all this happen? As any good con man will tell you, the success of a con depends on the mark wanting to believe. The victim, in essence, talks himself into getting fleeced.
In this case, the global investment community wanted to believe that Wall Street and other centers of financial engineering could manufacture investment-grade, long-term debt to meet the huge demand of insurance companies, pension funds and central governments for predictable, long-lived and safe interest-paying investments. Because the need for this paper was so great, these marks were willing to suspend belief. They knew in their heads that you can't manufacture investment-grade debt. But in their hearts they wanted to believe. They needed to believe. They had to believe.
Because, you see, it's the only way out for an aging world that's running a huge shortage of the real stuff. So investors were all too willing to buy fake investment-grade paper -- at prices commanded by the real investment-grade stuff -- until finally the con was revealed as assets were marked to market at 50% or less of their assumed value."
So basically it's all old people's fault.
LINK