Thursday, March 5, 2009

The Ransom Note

With all of the economic talk happening, and the financial system suposedley spinning out of control, it's been tough to get a real grasp on things. What Alex Bloomberg and Adam Davidson have been doing with This American Life has really helped put it into focus.

Since the main issue here is asset deflation tied in closely to the housing bubble, we have all of these banks that are watching themselves become insolvent (unable to actually pay all of their depositers back)."The Ransom Note" which was sent from one Deutsche Bank executive to another, pretty much tells it like it is. Read for your self:

"One main stumbling block to the purchasing of troubled assets has been pricing, specifically how does the government price a diverse set of assets in a way that does not put the taxpayer on the hook.
"Ultimately, the taxpayer will pay one way or another, either through greatly diminished job prospects and/or significantly higher taxes down the line to pay for the massive debt issuance required to fund current and prospective fiscal spending initiatives."

Take from that what you will, but it doesn't spell out a grand picture for us. I don't think he's wrong in a way. You could fire all of those bankers tomorrow with no back pay, and this gigantic bill would still have to be paid....

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