Correct, that is because companies like Carlyle Group took their 645 million in assets and leveraged it into 21.7 BILLION in mortgage backed securities. NOw the crap they bought is worthless because the mortgages backing it are no doc, subprime, alt A or just plain fraudulent. They are getting margin calls and want to be bailed out. When they were aming money hand over fist with the same leverage, I don’t recall them complaining. The gov’t had a roll to play in preventing this kind of expansion in credit which Von Mises warned about 75 years ago. Apparently Greenspan and Co never read Von Mises, or didn’t believe him. We are paying the price of their folly.
One more point. Technology is making this happen at a speed which would have been unimaginable even a generation ago. We are facing a car wreck at 100 mph here and no one knows what to do.
If we get another rate cut, where do you think gold and oil end up by the end of August?