How to Make Money

The most common of the financial crisis on the official explanation of the problem loan, but loan-to-time but a total of hundreds of billions, and the United States Z * F funds to rescue the market has already reached more than trillion, or do not see why the crisis in the first?  The article points out that there is a crisis of financial institutions "leverage" the transaction; other experts have pointed out that the financial crisis is behind 62,000,000,000,000 credit default swaps (Credit Default Swap, CDS).  In that case, loan-to-time, and leverage CDS between what is the relationship?  Between them through what kind of interaction resulted in today's financial crisis?  For the sake of user-friendly, we use a few hypothetical examples.  There is inappropriate to discuss criticism of the welcome.  First, leverage: At present, many investment banks to make huge profits using leverage to operate 20-30 times, the assumption that a bank's own A assets of 30 million, 30 times leverage is 90,000,000,000.  In other words, the bank A to 3.0 billion mortgage assets 90,000,000,000 borrow money for investment, 5% of the profits if the investment, then on the A was 4.5 billion profit, compared with the A's own assets, this is 150% The huge profits.  On the other hand, if the investment loss of 5%, the banks would pay A light all of its assets still owe 1.5 billion.  Second, CDS contracts: operating leverage as a result of high-risk, so in accordance with the normal, non-banks to carry out such a risky operation.  So some people think of a way to leverage the investment to do take "insurance."  This insurance is called CDS.  For example, Bank A lever in order to avoid the risk of bodies found on the B.  B institutions may be other banks, insurance companies may be, and so on.  B of A said that you help me do a loan default insurance kind of how I pay your premium each year 5 million, for 10 consecutive years, a total of 500,000,000, if I did not breach the investment, then the insurance premium you took white If breach of contract, you have to for my compensation.  A wish, if not breach of contract, I can earn 4.5 billion, which it used to come up with 500,000,000 insurance to do, I can a net profit of 4.0 billion.  If there is breach of contract, in any case have to pay insurance.  A run on so this is not to earn a sum of compensation business.  B is a smart, did not immediately agreed to the invitation of A, but to go back to do a statistical analysis found that the breach of contract case less than 1%.  If you do business 100, a total of 50,000,000,000 get the insurance money, if one of breach of contract, the amount of compensation more than 5.0 billion, even though both breach of contract, but also to make 40,000,000,000.  A, B Both sides agreed that the sale of this to their advantage, the final transaction immediately, to the satisfaction of all.

 Third, CDS market: B made after the insurance business, C in the next jealous.  C to B to go over there that you sell these 100 CDS I like how each of your contract to 200,000,000, a total of 20,000,000,000.  B would like to, my 40,000,000,000 to 10 years to get, there is now a hands 20,000,000,000, and there is no risk, why not, so B and C of the transaction immediately.  As a result, CDS as shares fall on the financial markets, transactions and trading.  C actually get these CDS, do not want to wait another 10 years to collect 20,000,000,000, but it listed for sale, the price 22,000,000,000; D to see the product, forget about 40,000,000,000 minus 22,000,000,000, There are 18,000,000,000 profits, which is the "initial", cheap and immediately bought it.  One hand, C earned 2.0 billion.  From then on, those on the CDS in the market for copied repeatedly, the market value of the CDS has Chaodao 62 trillion.

 Fourth, loan-to-time: the top A, B, C, D, E, F. ... are making big money, then the money out from there in the end come from?  Fundamentally speaking, the money from A, as well as with the A similar investor profits.  And most of their profits from the United States sub-loans.  It said a crisis meeting was due to loan the money lent to the poor.  I did not say this.  I think that time is credited to the general U.S. real estate investors.  These people have the economic strength enough to buy a home of their own, but to see prices rise quickly, moving from the idea of real estate speculation.  They mortgage their houses out loans to buy Housing investment.  In the interest of such loans to 8% -9%, based on their income is difficult to deal with, but they can continue to mortgage the house to the bank, borrowing money to pay interest.  A very happy at this time, his money invested in him; B is also very pleased that the market is very low default rate, the insurance business can continue to do so; back of the C, D, E, F and so forth are followed to make money.

 Five sub-loan crisis: housing prices rose to a certain extent, do not go up on, and nobody answered the back plate.  Real estate speculation at this time were anxious as ants on the hot pan.  Not sell the house, to keep interest rates high to pay, and finally to a blind alley of the day, the house Shuaiji the bank.  At this point on the breach of contract occurred.  A trace of regret at this time was, could not make money, but there is also less than a deficit, anyway, so there is B insurance.  B do not worry as insurance has been sold to C.  So now the CDS insurance where, in the hands of the G.  G from the hands of F spent 30,000,000,000 bought 100 CDS, have not had time to change hands from all of a sudden, this group was downgraded to CDS, with 20 violations, far exceeded the original estimate of 1% to 2% Default rate.  Each of default to pay 5.0 billion of insurance money, a total expenditure amounted to 100,000,000,000.  Add 30,000,000,000 CDS acquisition costs, G loss of a total of 130,000,000,000.  While the G is ranked the nation's top 10 major agencies, also can not afford such a huge loss.  Therefore G on the verge of collapse.  Sixth, the financial crisis: If the closure of G, then A spent 500,000,000 U.S. dollars to buy insurance on the bubble soup To make matters worse, because of A uses leverage to invest, according to the analysis of the previous, A Light lost all the assets of the debt is not enough.  A therefore face an immediate risk of bankruptcy.  In addition to the A, there are A2, A3 ,..., A20, all ready to collapse.  Therefore, G, A, A2 ,..., A20 came together in front of U.S. Secretary of the Treasury, a runny nose and tears a lobby, G must not close down, it all over the closure of one.  Minister of Finance a soft heart, just to the nationalization of the G, A ,..., A20 Since then, the total insurance 100,000,000,000 U.S. dollars paid by American taxpayers.

 Seven, the dollar crisis: the surface about 100 of the CDS market is 30,000,000,000.  The CDS market is worth 62,000,000,000,000, assuming that 10% of breach of contract, breach of 6,000,000,000,000 there CDS.  This figure is 300 million times 200.  If the United States Z * F value of the acquisition of CDS after 30,000,000,000 lose out 100,000,000,000.  So for those who breach the rest of the CDS, the United States Z * F on a sum of 20 trillion.  If you do not pay, it is necessary to look at A20, A21, A22, and so close down one after another.  No matter what measures the U.S. dollar depreciation is inevitable.  Over the assumptions used in calculating the number and the same is there a difference

The most common of the financial crisis on the official explanation of the problem loan, but loan-to-time but a total of hundreds of billions, and the United States Z * F funds to rescue the market has already reached more than trillion, or do not see why the crisis in the first?  The article points out that there is a crisis of financial institutions "leverage" the transaction; other experts have pointed out that the financial crisis is behind 62,000,000,000,000 credit default swaps (Credit Default Swap, CDS).  In that case, loan-to-time, and leverage CDS between what is the relationship?  Between them through what kind of interaction resulted in today's financial crisis?  For the sake of user-friendly, we use a few hypothetical examples.  There is inappropriate to discuss criticism of the welcome.  First, leverage: At present, many investment banks to make huge profits using leverage to operate 20-30 times, the assumption that a bank's own A assets of 30 million, 30 times leverage is 90,000,000,000.  In other words, the bank A to 3.0 billion mortgage assets 90,000,000,000 borrow money for investment, 5% of the profits if the investment, then on the A was 4.5 billion profit, compared with the A's own assets, this is 150% The huge profits.  On the other hand, if the investment loss of 5%, the banks would pay A light all of its assets still owe 1.5 billion.  Second, CDS contracts: operating leverage as a result of high-risk, so in accordance with the normal, non-banks to carry out such a risky operation.  So some people think of a way to leverage the investment to do take "insurance."  This insurance is called CDS.  For example, Bank A lever in order to avoid the risk of bodies found on the B.  B institutions may be other banks, insurance companies may be, and so on.  B of A said that you help me do a loan default insurance kind of how I pay your premium each year 5 million, for 10 consecutive years, a total of 500,000,000, if I did not breach the investment, then the insurance premium you took white If breach of contract, you have to for my compensation.  A wish, if not breach of contract, I can earn 4.5 billion, which it used to come up with 500,000,000 insurance to do, I can a net profit of 4.0 billion.  If there is breach of contract, in any case have to pay insurance.  A run on so this is not to earn a sum of compensation business.  B is a smart, did not immediately agreed to the invitation of A, but to go back to do a statistical analysis found that the breach of contract case less than 1%.  If you do business 100, a total of 50,000,000,000 get the insurance money, if one of breach of contract, the amount of compensation more than 5.0 billion, even though both breach of contract, but also to make 40,000,000,000.  A, B Both sides agreed that the sale of this to their advantage, the final transaction immediately, to the satisfaction of all.

 Third, CDS market: B made after the insurance business, C in the next jealous.  C to B to go over there that you sell these 100 CDS I like how each of your contract to 200,000,000, a total of 20,000,000,000.  B would like to, my 40,000,000,000 to 10 years to get, there is now a hands 20,000,000,000, and there is no risk, why not, so B and C of the transaction immediately.  As a result, CDS as shares fall on the financial markets, transactions and trading.  C actually get these CDS, do not want to wait another 10 years to collect 20,000,000,000, but it listed for sale, the price 22,000,000,000; D to see the product, forget about 40,000,000,000 minus 22,000,000,000, There are 18,000,000,000 profits, which is the "initial", cheap and immediately bought it.  One hand, C earned 2.0 billion.  From then on, those on the CDS in the market for copied repeatedly, the market value of the CDS has Chaodao 62 trillion.

 Fourth, loan-to-time: the top A, B, C, D, E, F. ... are making big money, then the money out from there in the end come from?  Fundamentally speaking, the money from A, as well as with the A similar investor profits.  And most of their profits from the United States sub-loans.  It said a crisis meeting was due to loan the money lent to the poor.  I did not say this.  I think that time is credited to the general U.S. real estate investors.  These people have the economic strength enough to buy a home of their own, but to see prices rise quickly, moving from the idea of real estate speculation.  They mortgage their houses out loans to buy Housing investment.  In the interest of such loans to 8% -9%, based on their income is difficult to deal with, but they can continue to mortgage the house to the bank, borrowing money to pay interest.  A very happy at this time, his money invested in him; B is also very pleased that the market is very low default rate, the insurance business can continue to do so; back of the C, D, E, F and so forth are followed to make money.

 Five sub-loan crisis: housing prices rose to a certain extent, do not go up on, and nobody answered the back plate.  Real estate speculation at this time were anxious as ants on the hot pan.  Not sell the house, to keep interest rates high to pay, and finally to a blind alley of the day, the house Shuaiji the bank.  At this point on the breach of contract occurred.  A trace of regret at this time was, could not make money, but there is also less than a deficit, anyway, so there is B insurance.  B do not worry as insurance has been sold to C.  So now the CDS insurance where, in the hands of the G.  G from the hands of F spent 30,000,000,000 bought 100 CDS, have not had time to change hands from all of a sudden, this group was downgraded to CDS, with 20 violations, far exceeded the original estimate of 1% to 2% Default rate.  Each of default to pay 5.0 billion of insurance money, a total expenditure amounted to 100,000,000,000.  Add 30,000,000,000 CDS acquisition costs, G loss of a total of 130,000,000,000.  While the G is ranked the nation's top 10 major agencies, also can not afford such a huge loss.  Therefore G on the verge of collapse.  Sixth, the financial crisis: If the closure of G, then A spent 500,000,000 U.S. dollars to buy insurance on the bubble soup To make matters worse, because of A uses leverage to invest, according to the analysis of the previous, A Light lost all the assets of the debt is not enough.  A therefore face an immediate risk of bankruptcy.  In addition to the A, there are A2, A3 ,..., A20, all ready to collapse.  Therefore, G, A, A2 ,..., A20 came together in front of U.S. Secretary of the Treasury, a runny nose and tears a lobby, G must not close down, it all over the closure of one.  Minister of Finance a soft heart, just to the nationalization of the G, A ,..., A20 Since then, the total insurance 100,000,000,000 U.S. dollars paid by American taxpayers.

 Seven, the dollar crisis: the surface about 100 of the CDS market is 30,000,000,000.  The CDS market is worth 62,000,000,000,000, assuming that 10% of breach of contract, breach of 6,000,000,000,000 there CDS.  This figure is 300 million times 200.  If the United States Z * F value of the acquisition of CDS after 30,000,000,000 lose out 100,000,000,000.  So for those who breach the rest of the CDS, the United States Z * F on a sum of 20 trillion.  If you do not pay, it is necessary to look at A20, A21, A22, and so close down one after another.  No matter what measures the U.S. dollar depreciation is inevitable.  Over the assumptions used in calculating the number and the same is there a difference between the actual situation, but the United States the severity of this crisis can not be underestimated.

between the actual situation, but the United States the severity of this crisis can not be underestimated.