One last point – a general one but an important one. Whoever buys the risk from the banks, no matter what claims are made for how separate they are from the banks and how much this removes the risk from the banks, ask yourself where these other people got the money to buy the risk from? The fact is 98% of all the money in the world is credit backed bank created money. No one is insuring bank risk or buying risky assets with sovereign backed money. They are buying it with credit backed money – credit that at some point was created by and loaned from a bank. Somewhere back along the chain a bank counts that loan as an asset and has a risk attached to it. That one simple fact means that it doesn’t really matter who ‘buys’ a bank’s risk. Ultimately it is still tied to a bank and the banking system. The risk never ever goes away until the loan it is part of is paid down. The risk from the bad loans that are still crippling our banking and financial system have not been removed or dealt with in any way other than to move them from the regulatory spot light to a darker corner where they can fester un-noticed. They will not be dealt with until the loans are paid down or written off. The losses must be cleared from the system and will be – by bankruptcy or bail outs. In the mean time all this insurance is, at best, moving the mines around the mine field.
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