Nick Drew, in the comments to my previous post points out, quite rightly, "...that irrational or not, the double- and triple-counting adds up to a massive loss of confidence"
So let's do this in Plain English.
Imagine the six people in the chain nursing a potential loss (the building society, the SIV, the investment bank, the hedge fund, the hedge fund investor/original vendor and the Sovereign Wealth Fund that lent the hedge fund the money to leverage up) locked in a room with a loaded gun. They are not allowed out until the game is finished and one of them is dead. As like as not, they will sit in the room for ever as nobody will want to make the first move. This is analogous to the credit markets freezing up.
OK. Let's replace the loaded gun with six envelopes, one of which contains the £30,000 loss and five empty ones. Nobody will want to open the first envelope. The credit markets are frozen.
But one party might make the sensible suggestion, "Hey, let's open all the envelopes and split the loss six ways; we all leave the room £5,000 poorer, but it's better that each of us takes an actual loss of £5,000 on the chin, rather than us all sitting here for ever worrying whether we'll be the one that ends up with a £30,000 loss!"
After a bit of horse trading and cajoling, the parties agree to this course of action and get on with their lives.
That, in a nutshell, is what I am suggesting.
Dismayed
2 hours ago
3 comments:
Can we just get a gun and start shooting a few people instead?
How about a poll, who would you shoot first if given the opportunity? :0)
nicely done, Mark
you are confirmed in office as my Chancellor (on probation) :+)
Ta muchly. In return, you shall be Energy Minister and Minister-in-charge-of-doing-caricatures-of-Opposition-front-bench-while-they-are-talking. Which you then pass round our front bench and we all collapse in giggles. While the twat is still talking.
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