I heard a very helpful investment talk show on WHAM 1180 AM from Rochester this morning. WHAM, you will recall from five years ago(!), is the station with a call in show on wine, an amazing concept. Anyway, this morning the WHAM voices explained the meaning of things like "mortgage-backed securities" and "credit-default swaps" so helpfully that I feel quite clever. Here is a NYTs blurb in the same style but without the voices coming out of my bedside table.

It boils down to not only the insane taking on of risk through the lending of money to those who would never be able to pay them off. It then extended to the insuring of those risks. So a bank gets an insurance policy to cover off the losses of a bank if someone does not pay their mortgage off. Then it extends further as the insurance companies turn those policies into commodities and trade them in a market as well. And then someone creates another investment product to insure or otherwise derive value out of the securing of investments on the policy market.

Not only are they dominoes waiting to be knocked over in order but as each additional layer of investment vehicle has its own pool of wealth associated with it - but all levels are dependent on the same risk event, the wobbly mortgages extended to people who can not pay them off. So when they are not paid off, each level needs to go out and find other money to pay off their obligations. Yet there is no other money. Because the wobbly mortgage itself was the investment at the end of money, trying to sweep up the last marginal crumbs of value in the entire economy.

So the US government will borrow to provide for that money (or an acceptable fraction of it) through selling US bonds to places like Canada, India and China which have either more traditional pools of wealth based on resources...or are willing to extend value at greater risk through non-democratic regulation of the economy like labour camps and that sort of thing.

It's an interesting old world.