Interesting piece about a bit of the background to the whole credit crunch - very rich people being unsure of the value of certain financial instruments and thus being unwilling or unable to trade.
Quote:
The simpler way of saying they can't assign a value to the more obscure financial instruments is that no one can put a price on them. Without a price they can't trade. They become invisible. The market freezes.
The Germans are suggesting that all of the central banks get together and figure out a way to create a market by offering to start buying certain instruments. When they sell, the price will be set, transparency will be re-established over time and the market will relax.
The problem is that it will mean that the price will likely be somewhere between 20 and 60 cents on the dollar for most instruments, if that much, and some very very wealthy people will have to take huge losses. These are the same people who have the power (under Bush and Merkel and Sarkozy) to prevent the central banks from taking that action, which means every day we get closer to the brink and the Arabs get richer, with their commodity markets absorbing all of the liquid capital that refuses to go into frozen credit markets. The sovereign wealth funds are just an expression of this problem, not the problem itself.
In short, the super rich, "Homo Davos," are playing musical chairs and seem perfectly willing to take the whole system down rather than be the first to take their losses. Shorter yet--capitalism can't function without losers, but the losers are so big that they can postpone their fate indefinitily. Or until someone bails them out. Guess who!
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I wonder if Karl Marx is laughing? Lenin did say 'Capitalism will sell us the rope with which we hang it', but I'm not sure even he expected it to be suicide.