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FALL STREETS WAR AGAINST LIQUIDITY AND RISK

 

Fall street is in a constant war against liquidity and risk, in that they borrow relatively liquid and low risk funds and invest them in higher risk and lower liquidity investments.

 

It is therefore in Fall Streets interests to always pretend that their investments are lower risk and have more liquidity than they actually have - in order to assure their lenders that their investments are in turn lower risk and more liquid than they actually are. They pocket the margin between the beliefs - belief arbitrage.

 

Thats why the instruments they invent are so complex- so they can indulge in a vast wizard of OZ smokescreen exercise which creates vast information asymetrys between the fall street insiders who are aware of what illiquid and risky crap they have invested in and the outsiders they borrow from who think that their investments are liquid and relatively low risk.

 

The belief arbitrage created by this belief gap is huge and creates the huge fall street bonuses and salaries.

 

But now the veil, just like the sceen hiding the wizard of OZ, has been peiced by the reality of tonto the sub prime dog.

 

And so Dorothy the fed comes to the rescue.

With the tin man Paulson and the Straw man Bernake.

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