Toxic assets (financial derivatives based on sub-prime and other mortgages) have never been marked down to their true value (mark-to-market).
Joe suggests that it is time for some haircuts, and that the sovereign governments should be the barbers, as part of the exit strategy from the broken debt-money system.
Thanks for this piece. While I see nothing intrinsically wrong with this type of settlement of accounts due to the numerous defaults, as it stands it is likely to set off a buying spree by those who have access to ZIRP, aka reserve-less debt based money. It would seem that this process needs to be parallel with an Employer of Last Resort program to restore the capacity of the occupants to resume payments on a mortgage. The application of the bail-out money acquired by various routes be applied to the lowering the marked to market value.. The side issue here is that the major TBTF banks also, by way of insider trading and fraud by mis-representation, greatly contributed to the collapse of the real economy. Further by defining the apparent problem as a liquidity problem only the real economy was hung out to dry. Even further, in addition to the problems of debt based money and or unregulated speculation, the massive trade deficit became a secondary contribution to the inflation of the speculative exuberance. It seems like a bit of pulling on a loose thread will quickly create other issues. This is not to say at all that monetary reform and the transition to a sovereign fiat monetary system should not be done. At the minimum it is a good topic toward practically realizing the necessity of monetary reform.
Tadit
Thanks for that comment.
“As it stands”, certainly lots of things can happen.
Certainly also, when tied in with monetary reform, there is no reason to expect a buying spree to be possible.
Access by Bankcorporations to ZIRP federally-created, faux-reserve money should be completely eliminated in the process of reform.
I would agree that an ELR program ought to be considered in the context of the restoration of the money-creation powers to the government and the people.
It is an important additional issue to the one of restoring financial viability to our institutions via the Great Settlement of Accounts that we are discussing here.
I’d nominate Jane DArista to represent the people.
As to the side issue that the shadow bankcorporations have stolen the real economy – the one where people live – with their “financialization casino”, that issue not only becomes a major issue, but the foundation for thinking about the need to restore economic democracy.
I recognize that the Great Settling of Accounts is a side issue when it comes to the daily evolving, slow-motion train wreck of the debt-money system.
But whenever whatever happens, there will be major financial dislocations that will affect everyone’s lives. I think it’s therefore healthy to have a discussion of how to minimize the effects on real people when the too-big-to-fail do fail.
Who’s ready with an exit strategy?
WE need one.