Did you know what toxic assets were before last week? No. Neither did I, but I do now.
You see, if somebody owes you money, that’s an asset on your balance sheet. A paper asset. A theoretical asset. If you’re a bank, you can have huge assets on paper, depending on how many people owe you money. You lent them this money against the value of their houses, and on the assumption that they can pay you back with interest.
Well and good.
Now, suppose you lent stacks of cash to buy houses that are worth nowhere near what you thought? Well, that might not be the end of the world if the people you lent the money to are able to pay you back, but supposing they can’t? Supposing these people you lent all this money to are shit poor and should never have been borrowing that amount in the first place? And suppose the houses they bought are heaps of crap, in shit areas, with a value nowhere near what was claimed? Or alternatively, supposing you lent the money to property developers on condition that they wouldn’t have to pay you until they sold the new houses, but now they can’t sell them.
What then? You can’t get your money back from the borrowers because they have nothing, and you can’t sell the houses because they’re worthless. Where does that leave you?
Well then you’re fucked, aren’t you? You’re one screwed bank. And all those shit loans on your balance sheets are still counted as assets, but they’re worse than useless. They’ll drag you down. They’re fucking toxic.
That’s toxic assets.
How about short selling? Well, I didn’t know what that was until last week, when somebody kindly explained it to me. Short selling happens when you own a load of shares, and I borrow them from your broker. Yes. I can do that. I can borrow your shares without your permission, and then I can sell them, let’s say for a million.
Why would I do that? Well, you see, I’m hoping their price will go down over the next few days, and then I can buy them back for let’s say 900,000 and return them to your broker. I have a hundred grand in my back pocket, and you have a big pile of devalued shares.
That’s short selling. Isn’t it great?
I think we’re getting the hang of this financial jargon. Before you know it, we’ll be Masters of the Universe, just like Dick Fuld, the Gorilla of Greed, who got $480 million for crashing Lehman Brothers into the ground.
Now, derivatives are something else again. I don’t know what the hell derivatives are. I tried to figure it out, but my brain started to hurt, so I stopped. With derivatives, you don’t actually have to sell or buy anything at all. You deal in futures, options and swaps. You might be dealing in something based on maybe a thousand of those horrible toxic mortgages, that might be worthless, but haven’t been exposed for what they are yet. Let’s say they’re worth a hundred thousand each, strictly on paper and you have a thousand of them bundled together. You can claim they’re worth 100 Million and issue some kind of a security or whatever it’s called. The trick is to get rid of it as fast as possible to some other fool, or some other shark who realises perfectly well that what he’s bought is a load of shit, but hopes he can find a fool to buy them.
Right? It’s toxic pass-the-parcel. No different from the Albanian pyramid schemes, except the suits are sharper and the faces on TV more earnest.
Moral hazard is another new one on me. I never heard of it until last week, and neither did anyone else I asked. We saw an example of moral hazard the other day when an egregious little shit working for Irish Nationwide took advantage of the government’s guarantee to try and drum up business for the bank his revolting Daddy runs. Moral hazard is when I pick you up off the road and you kick me in the crotch for thanks.
I’m getting a worse pain in my brain than I already had so I’m going to stop soon, but let me ask you a question first. Do you notice anything all these terms and practices have in common?
All right then, perhaps it’s the fact that the people behind them contribute absolutely nothing to this world, add no value and produce nothing.
Parasites every one. Useless bloodsuckers who still have the gall to refer to their schemes, policies and accounts as products. Products my arse. A product is something produced by a craftsman from the honest labour of his hands. The world would not miss a single one of the people who dream up these so-called products if they were all herded into a rocket and fired off to Mars.
By the way, feel free to correct me if I got any of this shit wrong. And while you’re at it, feel free to correct the world’s leading financial experts for getting everything wrong.
Previously on Bock:
Elsewhere: Web Economy Bullshit Generator