Breaking down the sub-prime mess

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This spoof interview is surprisingly accurate about the cause of the sub-prime mess that's all over the news lately.

What Created The Subprime Mess - Watch more free videos

The craziest thing about it is the last section where they talk about what happens now to fix the issue. Whilst they jest about how government & central banks have to bail out all the "very sharp and sophisticated people" its a spot on comment. It highlights an interesting financial strategy that basically states that if there's a risk that you will go bust, make sure you do it in the most spectactular way possible such that the negative effects on the wider economy will be so pronounced that the central banks are forced to step in. Its all win as long as you can scale your crazy scheme up to a level where people will care when you fail.

The other comment he makes about how "you, the pensioner pays for it all" is also spot on. The money that's lost is not lost by these "sophisticated" investment banks but random grandmas who wouldn't have the foggiest clue how to read a Product Disclosure Statement, and your super fund.

Of course you can't blame these "very sharp and sophisticated people" for deliberately misleading innocent investors. The innocents should take responsibility for their own financial decision making too - as the old saying goes "if it looks too good to be true, it probably is". Ask yourself why, if it is actually a good investment, is it being offered to YOU?

Now I wait patiently to see what the next crazy wave will be.

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This page contains a single entry by goosmurf published on January 8, 2008 9:19 PM.

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