Ah! A Sunday monring respite.
The “Credit Crunch” or the freezing up of the Commerical Paper (CP) markets and the related money markets is a complicated and mysterious business to most of US non-Finance folk.
This American Life [NPR] has another milestone audio program explaining what exactly the big deal is and what is at risk on Wall Street,and how that will trickle rain down on everyone else.
A very good explanation of what Credit Defaul Swaps (CDS) are that isn’t snore inducing.
Also gives us a glimpse as to why those speculative instruments are at the heart of the coming collapse.
[This American Life] (To save this mp3 file Right click, Save Target As, and play in Winamp or WMP… or, simply click th elink and it will play in your browser window). 60 mins.
So, to recap: let’s see, highly-leveraged premiums bet against a total of 60 Trillion dollars in the CDS market against troubled assets of declining values means… Ka-BOOM! How the players gonna pay that? (Keep in mind the entire US bond market is only 5 trillion.)
Answer: the players can’t.
Additional commentary [Market Ticker Forum]
Previous from This American Life: The Giant Pool of Money.
Here’s the Sixty Minutes take from the CBS website which was, surprisngly, pretty good, albeit a bit late to stop the bailout giveaway. [A Look at te Wall Street Shadow Market] (12 mins.)
“Wow… I think Bush finally found those ‘weapons of mass destruction.’ And to think, they were in New York all this time.” -anon