- The linchpin in America's financial system was that it assumed that in the worst of times only 3, or maybe 4% of Americans would stop paying their mortgages.
- When that number DOUBLED to 6% the whole system froze up.
Now, let's use one more simple analogy. This from Lingales. All of the dicey CDOs, swaps etc were all hedged risk. In short, they were nothing more or less than insurance policies against mortgage defaults. The net effect was some four fools bought four separate insurance policies on the same house. When the 6% f America's houses burned down (against all the odds and anybody's best guess) all of those policies could not possibly pay off. So the all of the insurers were headed for certain failure. Except that 'we' wouldn't let them fail, because, analogously speaking, we would have no more such thing as fire insurance. And we couldn't have that, now could we?
What we have essentially done now, is to use the 'full faith and credit of the USA' aka Treasury Bonds to use instead of fire insurance, and given the all those insurers a bailout via low interest rates and cash until they get on their feet. But the cost of all those insurance payouts have now been transferred from Wall Street to the US Treasury (meaning you Mr. Taxpayer) - mind you without much work being really done on making any houses more fireproof.
So all of these corruptions the OWS crowd will inevitably find are just kids playing with matches. The larger problem remains unsolved. Which is how do you stop from over-insuring against 'fire' i.e. financial failure?The problem isn't that capitalism is broken. The problem is psychologically, we don't like the consequences of losing the wealth it produces. We like playing with fire. We just don't like getting burned. Nobody does. So we keep insuring against getting burned.
The problem is that you can't. Because this is America, and most Americans believe they can guarantee anything. That's why Obama was elected because he promised he could guarantee healthcare insurance for everyone. And this is the fundamental problem.
Everybody in OWS is suffering from the exact same illusion that caused the problem in the first place. They believe in guarantees. They believe that all you have to do is find the right sucker (or class of taxpayers, or government agency, or Wall Street company, or Buffet-like billionaire) who will pay a little bit more for the guarantee.
It is not the desire for security that causes our ruin, it is the implacable demand for it.
Listen to the rhetoric and you will see the fragile state of the American soul. We demand infinite recourse against all slights and offenses. Against fat in the food at McDonalds. Against incompetence in the teachers in free public schools. Against offensive remarks and jokes. Against the very presence of unwanted people from undesireable countries. Against unbelievers. Against believers. Against the possibility of dying of cancer. Against the belly fat you get from AIDS medication. We have become a nation of infants with zero tolerance for pain. So somebody has got to pay.
Today is a good day to be a grifter. That is because all the yellers and screamers want to hear is how somebody screwed up and made their life miserable. All a grifter has to do is agree and sell them an insurance policy against that somebody, write up some legal fine print that says 'you take your chances' and voila - there's an app for that.