The way out of the crisis. Three questions to Guy Verhofstadt

The central social question is the trade-off between public good and private happiness, between society and morals. For centuries religion offered a solution. But now religion turns out to be relative, what will fill the void? Economics?

Well-being presupposes a continual increase of wealth in the form of capital goods. A balance must be found between investing and consuming: we must save to keep investment healthy, and invest to keep saving healthy. The social order in a secular age furthermore rests on the “bluff and deception” that capitalists save too. → Read More

Post scriptum. Collateral damage with CDOs

Guaranteeing (1) the reinsurance (2) of credit risk (3)

May 14 the Belgian government – again – had to intervene to save KBC Group. The risks in synthetic collateralised debt obligations the financial group is exposed to have led to write-downs of 3,8 billion EUR in the first quarter. We remind the reader that the fair value of a financial instrument at any time should reflect a potential transaction price. A change in fair value does not necessarily imply a cash outflow.

But where all of these junk credits not set to zero? → Read More