There is a real danger in reading this post. Your eyes will likely cross, gloss over, and a bit of spittle will possibly begin to trickle from the corner of your mouth. In my attempt to understand the causes of the recent financial crisis, I, by necessity, undertook what has turned out to be self torture - the attempt to understand the mechanisms and definitions of the "shadow banking system." Mortgage backed securities are the most well known component of this shadow system. The least painful exposition of some of these instruments has been provided by Mr. Holloway. Read his article "Is this complicated, or What?," by scrolling to the last article on the page.
The next time you hear someone denounce the 'greed' of the extreme *free* market, of capitalism, try to remember that this is NOT what we have. The US economy was close but not entirely free during the early parts of the industrial revolution. Now, even the term 'mixed' economy is starting to be strained by the overwhelming pervasiveness of the American government in regulating, pressuring, tweaking, pulling, and adjusting all aspects of the economy. At times you will hear a leader of a big business disparage laissez faire capitalism or the free market. Do not be misled into thinking that, well, if a big business man thinks the free economy is unfair or ill suited to producing a just, profitable economy for all, then surely we are justified in fiddling with it. Without exception, this will be a businessman whose interests and competitive advantage depends on PULL in Washington. The very presence of the innumerable Congressional lobbyists and the billions pou...
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