Comments on MoneyAisle Blog: The Credit Default Swap (CDS): Are Taxpayers Ultim...

Based on all that is happening, it is critical tha...

2009-01-18T11:29:00.000-05:00

Based on all that is happening, it is critical that middle class families split their goals between:

1. Paying off high interest credit cards.
2. Establishing the proper emergency fund to secure their family for the immediate long-term.

All of these things you are writing about are not only true....worse times could be coming. Developing a plan to save your family should now be your #1 goal.

Thank you for a great blog!

Loyd Ford
www.STICKYASSET.com/blog

@andrew: Increasing awareness of such a critical i...

2008-09-11T15:03:00.000-04:00

@andrew: Increasing awareness of such a critical issue is the first step. Unfortunately, most of the media is focused on trivialities ("Lipstick on a Pig", for instance) instead.

It would be great if you could spread the word among your friends and ask them to pass it on, as well. Increased awareness of such an important issue should lead to some pressure on the powers that be.

Andrew, here's an interesting statistics. Since t...

2008-09-11T11:28:00.000-04:00

Andrew, here's an interesting statistics. Since the takeover of Fannie and Freddie, mortgage rates has dropped by .4% on average. Apparently, because of the uncertainty surrounding Fannie and Freddie, it was costing more for them to sell their bonds. After the takeover, buyers of these bonds are willing to take on these risks for less. If Fannie and Freddie were to dissolve, what would the mortgage rates and therefore real estate industry look like?

I have another question (or two). Some claim that ...

2008-09-11T09:39:00.000-04:00

I have another question (or two). Some claim that if the government didn't step in, failure would lead to much more economic pain. How bad would it be? And wouldn't that be the good kind of pain, leading to people learning lessons?

Does the $10 trillion value assume that all debt w...

2008-09-11T09:37:00.000-04:00

Does the $10 trillion value assume that all debt would default, which is possible, but very unlikely. It's hard to know what the potential debt would be since it requires looking into the future. The hard part is the system feeds back to itself; more defaults engenders even more defaults because of higher rates and lower home values. However, barring an absolute meltdown of the financial system, I would think that the majority of loans will not default.

Thanks for the very enlightening explanation of CD...

2008-09-11T09:26:00.000-04:00

Thanks for the very enlightening explanation of CDS. It seems to me, an untrained eye, that CDS has lots of parallel to the insurance business. You're essentially insuring some asset by charging a premium to take on the risk for the potential loss/default of that asset. However, the insurance industry is heavily regulated, relatively stable, somewhat transparent (at least in regards to reserves and underwriting), and at the same time profitable. I think the CDS should follow the insurance industry example. There needs to be more regulation to ensure transparency and stability of this industry. They say that sunlight is the best disinfectant and I think this market is need of more transparency to clean out some of the excesses of earlier years.

your assumption is somewhat correct. As soon as t...

2008-09-10T22:34:00.000-04:00

your assumption is somewhat correct. As soon as the Government takes over those companies, the debt becomes de fact government debt. This in fact doubles the US national debt in one fell swoop.

So the US Government now owes $10 trillion +/-. This is absolutely a problem inasmuch as it affects US inflation and currency value, etc etc.

Is there anything that we can do about it?

2008-09-10T21:04:00.000-04:00

Is there anything that we can do about it?