Friday, March 27, 2009

How do you fix a busted Ponzi scheme? Why, create an even bigger one of course!

Remember what I said earlier about Mark to Market accounting changes? Well it appears the U.S. monkey brains are about to have a go at it. The basis of their thinking can be summarized by saying they are going to let the investment industry have it's way and just make shit up.

Although the financial and government gurus would have you believe this is complicated and love to use big words and ass backwards phrases to make it appear complicated, it isn't. They are just doing that to confuse you and make you fuck off. Remember Obama's great indignation about leveraging 30 times in one of his speeches? Heh...

Something is only worth what someone else is willing to pay for it. If no one wants to buy it, it's worth what they are willing to pay, right? That is nothing. So the essence of the changes the monkeys want to make will allow industries to set a value on these otherwise worthless assets and allow them to represent that value on their books, thus falsely representing the true overall value of the company. In a worst case scenario, a company could have many times more worthless assets on it's books than those with value making the company very risky if not insolvent in real terms, yet still able to represent itself as a viable entity to investors and stock market purchasers. Neat wot?

Reminds me of a line from an old song; Something for nothing and your chics for free...

Oh, and wasn't it just a week or so back that Bernanke said no to this? Next thing you know, he will be saying, "My friends, trust me"..

Thanks for the link Charles. Because of you, I'm having Pepto Bismal for breakfast this morning, instead of Crumpets and Spam.... lol


  1. Looks like Enron accounting to me. Have people forgotten how that turned out?

  2. That's the exact comparison knowledgeable opponents are making Herb. Didn't the US Justice system send those guys to prison for a very long time for doing that?

    Is this their way of avoiding extreme inflation? I think they know well enough they can't create enough currency to balance the books without severe consequences, so they want to create Wonderland. A place where all is forgotten and everything goes back to the way it was.

    Why not just hire Magicians? At least they are entertaining, and it's all about illusion anyway.

  3. Lest anyone assume that capitalism is dead, it merely has taken another twist. The aim remains to syphon money out of other pockets into yours. This is merely a touch of creative accounting to permit another go.

    Who is going to fall for it? Even the fools whom it is proverbially easy to part from their money must be reading about it. So what are they going to base their corporate evaluations on when buying stocks and bonds? The whatever-everyone-else-is-buying yardstick might be broken.

  4. Mark to market will be a great buying opportunity for the banks to use the cash they have been hoarding.

    Ironic the current owners/issuers of these now toxic assets will probably be the big winner after the US treasury prices them in.

  5. A full circle approach Anon. No one who matters gets left behind. Kinda makes you feel all patriotic.

  6. Well, that sucks.

    Heard the 'great' one speak. The only thing that's changed is the title of the song. Same beat, same dance.

    Don't think the Yanks are going to be too thrilled.