A New Asset Class… Just in Time for the Next Crisis

22 May 2018

Prior to the “Great Recession” of a few years back, a new asset class was developed based on bundled, asset-backed securities. These were called collateralized debt obligations, or CDO’s.  Most people will remember them in the form of securities tied to sub-prime mortgages, largely the cause to the that most recent financial collapse. Essentially this is the creation of money out of thin air. No, wait, it is the illusion of the creation of money. The money that was “created” came from working American taxpayers in the end! (And into the pockets of criminals who were not held accountable!)

To get back on track, the creator, or as a recent Wall Street Journal article refers to him, “the grandfather of CDO’s”, is at it again. This time he is bundling student loan debt! It seems one of the grandfathers of the 2008 financial collapse wants to relive his past.

My question: Is it really safe to let this man have anything to do with finance? Not only should he not have anything to do with “developing asset classes”, he shouldn’t even be allowed to be a cashier at 7-11.

For more on how student loan debt could help bring our economy down, see the Investopedia article on the subject.


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