Dave Wrixon

Can We Insure Against Systemic Risk?

Try asking your insurance broker if he has a policy for victims of Ponzi Schemes.

Bank Nationalization and the TARP

Sounds fine in principal as long as you assume that the Treasury has its own money tree.

What is in fact at stake is the stability of the monetary system itself. Sure the US Government can print all the dollar it wants, but it has to convince people that the monetary units still have some value.

Yes, we know that the dollar it the World's Reserve currency, but in reality all that means is everyone is in a postion to dump it when the fear really sinks in.

Each dollar represents a stake in the US economy itself, which has shrunk to an alarming degree not just in the revenues it can generate, but also in the intrinsic value of its gross assets, much of which is in foreign hands anyway. Given that you have a share in an enterprise that can distribute additional shares at will without giving existing holders any rights to subscribe for the free handouts, would you continue to hold stock in Uncle Sam? Or would you scramble for the door?

Holders of dollars and potential bidders for T-Bonds are watching every move. It seems China is spending a lot of her dollars on mineral resources which is subtle way of off-loading without freaking the market.

The problem is that if the dollar itself becomes worthless as with Zimbawe, then the whole US economy is worthless. Consequently, You had better hope they figure out a way to make that 1 inch bung fill that 2 inch hole. This side of the Atlantic we are just hope that we don't get swamped by the wave from the sinking ship.