A handful of guys in Iceland, who had no experience of finance, were taking out tens of billions of dollars in short-term loans from abroad. They were then re-lending this money to themselves and their friends to buy assets—the banks, soccer teams, etc. Since the entire world’s assets were rising—thanks in part to people like these Icelandic lunatics paying crazy prices for them—they appeared to be making money. Yet another hedge-fund manager explained Icelandic banking to me this way: You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets. “They created fake capital by trading assets amongst themselves at inflated values,” says a London hedge-fund manager. “This was how the banks and investment companies grew and grew. But they were lightweights in the international markets.”

Except, unlike the Margaritaville mixer, there is not incompetence here but sheer human greed abusing the awesomeness of a belief-based market system. Belief is bad, knowledge of facts is good. Capitalism, however, is based on secrecy, and secrecy creates belief, because humans WANT to believe. That is why religion is so widespread.

Especially note the last line, “They were lightweights in the international markets.” Everyone was doing this. This is why we are in a debt/credit crisis of epically global proportions. More debt cannot help this, but more debt we incur!

Here’s to paying back $20+ Trillion for the $10 Trillion and rising we currently owe!

Tags: bitch bitch bitch, depression 2.0, no really we're really fucking fucked this time

This entry was posted on Wednesday, April 1st, 2009 at 09:34.