Tuesday, May 17, 2011

Equity versus Debt

I bought shares in CIT Group Inc when the stock had crashed to pennies.  My theory was Geithner would bail this entity out like he had the Majors.  He did not, but he did give the bond holders one hundred percent on the dollar of their investment.  I will frame my receipt of bankruptcy soon, as to remind myself of the crazy world finance lives in.

I got to thinking, what will happen if the US defaults?  What is the debt, and what is the equity?  Who will get paid?  We know what the debt is, those are the bonds.  It has been my belief that either the World Bank or the IMF will restructure the central bank debt of the world and collateralize the debt owed to gold.  This will mean that the proportion of debt will be in terms of what gold is worth, and each central bank will pay each other off will whatever gold reserves they have.

In my view, the equity is the dollar, and all fiat.  This is a fresh thought, so maybe the equity is something else, but as far as know, I think that fiat is the equity that has been created by the central banks.  I will think this through further.

I will also take this time to thank all of my readers.  This blog has been my privilege, and I am happy you have enjoyed it.  There are steady hits from all over the globe, and I am glad you all feel welcome to read here; you are, and thank you again!


  1. ha ha
    And I thought I was the only one who has tried to think this through. This IS the crux of the problem.
    Most all this crazy debt is held by the CB's/IMF/Fed. They made BAD investment choices. Very bad ones. Too bad for them. And then leveraged themselves to the point of oblivion, showed fantastic profits and paid themselves. Very nice.
    Then it all blew up and here we are now trying to fill the hole of money that is already gone.
    Unfortunately they're the ones on the case to solve the problem right?
    NO way they're going to haircut themselves although that's what needs to be done. That's what WILL be done.
    Instead TPTB look to cut spending, raise taxes and screw the taxpayers.
    I, me, myself, after much brain twisting have come to the conclusion that they will never figure it out and/or agree to haircut sizes.
    We're going to have to default. Did I mention that we are going to have to default?
    Debts that cannot be paid, will not be paid. Duh!
    Boy we had a great once in a lifetime opp back in '08 to just let 'em go under but Paulson cried wolf and congresses knees buckled. Dopes!
    And so, like Peter Schiff, I believe that the stone is already cast and gold/silver are already serving as the defacto reserve currency.
    Crazy huh?
    A very most excellent excuse to keep stacking, because whether it blows up slowly or all at once, AU AG is and will be Genuine Currency.

  2. Thank you for providing such great material to read.

  3. Always enjoy your take, don't always agree, of course, but does MAKE me think.

    A man who thinks cannot be ruled.
    Ayn Rand