Maggie's Farm

WWII was simply the final straw in the demise of a once huge empire and the once most powerful country on Earth.

Actually one can trace the beginning of the end of Great Britain to August 4, 1914 when she declared war on Germany. Within nine months G.B. was literally out of ammo and the government resigned. Lloyd George became P.M. and immediately set about seeking US help even though Woodrow Wilson's policy was strict neutrality.

Lloyd George, not to be deterred , for it meant G.B. survival as an empire had his good friend J.P. Morgan begin to finance the war on a sub rosa basis. However much reisitence was met within the US given that 1 in 10 Americans via immigration in the previous ten years was German, and another huge population of Irish who hated the Brits. Nonetheless J.P. and Lloyd George prevailed. Lloyd uses an intermediary, W,G Runciman to represent G.B. in secret, with Morgan. J.P became the official provider for Gr. Britain even as she lost ground and money.

By 1915 GB needed a 15 billion dollar loan which Wilson's cabinet forced him to provide. Wilson now knew the contagion of war could not be contained simply in Europe.

By July 1916 the Battle of the Somme had turned the fields into an abattoir with 20,000 men killed in the first hour and a half.. It was then that the approximately 10 million already dead and another 100 million who wished they were realized they had a world so distorted that their continent was simply blank idiocy, a slaughterhouse inhabited by dead men and millions of unmarried women who would never find a mate.

That was the end of GB's empire. American took her place. Now we are facing our time of blank idiocy.

GB never recovered. Empire and power gone forever. The wheel never stops turning and now we wonder about our primacy.

Austerity USA or another brick out of the Wall


Bad, yep B. A. D.…


Collateralized Debt Obligations (CDO) structuring. I wanted to know what I am missing: why is the market so sanguine in the face of deteriorating collateral values in the mortgage market? One of my theses has been that, as the mortgage market deteriorates, investors holding CDO as an investment would realize losses and this would feed into other risky asset classes. Why aren’t losses being seen when the market is clearly deteriorating?

The answer gleaned from articles is simple and scary: [und]conflict of interest. [/und]

Due to the many layers of today's complicated credit products, the assumptions used to dictate the pricing and outcome of CDO are extremely subjective. The process is so subjective in fact that in order to make the market work an “impartial” pricing mechanism must exist that the entire market relies upon. [und]Enter the credit agencies[/und]

They use their models, which are not sensitive to current or expected economic activity, but are based almost entirely on past and current default rates and cash flow to price the risk. This of course raises two issues.

First, it is questionable whether "recent" experienced losses over the last few years really represent the worst of the credit market (conservative). But even more importantly, it raises a huge conflict of interest: the credit agency's customers are the very issuers of the tranches they rate. The credit agencies, therefore, need to compete for business based at least in part on the ratings they are willing to give these tranches. As a result, they will only downgrade when forced to by experienced losses; not rising default rates, not a worsening economy, but only actual, experienced losses. Even more disturbing, they will be most reluctant to downgrade the riskiest tranches (the equity tranches) since those continue to be owned by the issuers even after the deal is sold.

So even though the mortgage market has deteriorated substantially, mark-to-market losses by those holding the CDO paper have generally not been realized simply because the rating agencies have not changed their ratings for all the above reasons. Accounting rules only require holders of the paper to mark prices according to the accepted model, not actual prices. Then I got sick and puked.