OK so I am going to attempt this week to do just a little justice to what I heard on the weekend, because you need to hear one opinion and take that into account on this financial crisis.
It will take me several posts but let's see what come out.
Tonight I want to take you to something that makes it clear to those naysayers "Australia is imune from what happens in the USA".
What do these words have in common : CDO's, Shire councils, Iceland,Wall Street and Sub-Prime Mortage.Well it seems our conservative shire councils and other community organisations decided the bank was a far too conservative place to put community funds and went for an extra % in interest.Here is a line from and an article in The Australian :
"Between 2005 and 2007, the Parkes council put more than $13.5 million of its savings into synthetic CDOs." More on this........
On the weekend it was explained how this happened.Basically broke people who could never get a housing loan were loaned money to buy a house at 100%.The mortage was bundled with other mortages, sent off to Wall street where the smoke and mirrors people did their work and sold the CDO to Iceland which found it's way to Australia.
Despite trillions,yes trillions lost in this the people who did it are still free and walking around.
Today's Lesson : If it looks too good to be true, it probably is - Don't be greedy"
So you see this is just one example of the effect - many more to come in the next few posts.
This powerpoint below provides the best description of CDO's, however be warned there is some what might be for you offensive language - I decided to run it as it explains better than I can.
It is a powerpoint so you have to click the arrow to change the slides.
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