Tuesday, October 30, 2012
Thurston Howell is alive and well
But what sparked this little lesson on how our monetary system works? It was the announcement that USB the Swiss bank is about to lay off 10,000 workers mostly in the U.S and London. To most of us working stiffs that would sound like a very bad thing. Who'd want to hear of a factory laying off that many people here? But somebody always wins in these types of ventures and that would be the investors, the golden parachute boys, and the next crop of CEOs to grace the board room. They nearly always win no matter what happens.
So what's going on in Switzerland? It seems the value of their debt is not so valuable anymore or in this case they got piggish. Remember debt to them is an asset.
"Banks can post gains if the value of their debt falls, because it would theoretically become cheaper for the bank to repurchase that debt. But the rule also says that when a bank's debt increases, it must take a write-down because it would theoretically have to pay more to buy back its own debt on the open market."
A little too much leveraging here Mr. Banker? But shed no tear for Herr Gotrocks he gets a tidy sum for cleaning out his desk along with the prospect of starting his own investment scheme and life in the good old boys club goes on. For the rest of us we're too principled to play their little Ponzi scheme and we couldn't because they make the rules and we aren't included in their game. Nothing like being the low man on the totem pole when the budget axe is sharpened. Don't be too sympathetic for the 10.000 though. I hear they make a couple of hundred thousand a year on average. So in this case it's the wealthy eating the lesser wealthy.