Chapter 1717 The Situation Is Grim

When the global financial market was severely turbulent, stocks, futures, bonds, etc. fell one after another, but many people found that the prices of crude oil and gold fluctuated continuously, and it can even be said that they did not fall at all, but rose slightly.

First of all, the hot money that fled from the bond and stock markets has entered the futures market one after another. Futures are also goods, which can be regarded as real objects.

Originally, they could still cash out their bonds and save them in U.S. dollars, but the U.S. dollar is depreciating, and they lose money by saving money.

The decline in the stock market, coupled with the emergence of various bad news, caused a large number of stockholders to flee. Of course, there are also some investment funds that took the opportunity to short-sell the stock market and make profits by reverse operation.

It's a pity that this can't be done soon, not because the government doesn't allow it, but because no financial company is willing to lend you stocks.

Everyone knows that the stock market has fallen badly, so why lend you stocks?

In the past, the leverage ratio of many investment companies continued to rise, from five times to ten times, and then to thirty times, and some companies even created an ultra-high leverage of fifty times.

Don't think that these investment companies are stupid, and they are looking for death with such a high leverage. They can buy insurance, a kind of insurance on credit default swaps.

Banks cannot use these high leverages, but those fund companies can. They use high leverage to invest. What if the risk is too high?

Buy insurance. Of course, this is not insurance in the traditional sense, but the actual effect is the same as insurance.

The fund company approached the bank and said, my investment here is very risky, how about you help me with loan default insurance? In ten years, I will pay you 100 million premiums every year, which is one billion US dollars.

If I did not breach the contract, then you will get the premium for nothing, and if you invest my premium, you must be able to make another profit, right?

If I breach the contract, then you have to help me lose money.

What Party A thinks is that if I use leverage to invest, the profit itself will be multiplied. If I take out one billion yuan to buy insurance, I will still make a profit.

After analysis, Party B believes that the risk of Party A's breach of contract is extremely low, maybe only 1%, so this insurance can be done, and the profit is not low.

If there is only one, then the profit is not particularly high, but what if you can attract the same hundred customers? Wouldn't it be 100 billion insurance money collected?

In this way, even if one of them is really unlucky and loses money and defaults, I can still afford to pay. Paying insurance compensation with the premiums of other policyholders is itself a normal operating method of the insurance company.

So the bank sells this credit default swap insurance contract to major fund companies and charges more insurance premiums from the company, so they will be safe.

However, it will take ten years to fully obtain this profit, which is too slow, right?

So they negotiated with a third party, my contract is worth 100 billion US dollars, but it will take ten years to get it, and now I sell it to you for 50 billion US dollars, do you want it?

After bargaining, the third party bought the 100 billion dollar contract at a price of 40 billion U.S. dollars, and Party B directly pocketed 40 billion U.S. dollars in profits.

The third party also felt that ten years was too much time, so he put the price on the market for 45 billion U.S. dollars, attracting a fourth party to buy it. Once they changed hands, they easily pocketed a profit of 5 billion U.S. dollars.

After so many changes of hands, coupled with the attractiveness of this model, the market for this kind of insurance contract has become extremely large, with a total amount of more than 60 trillion US dollars.

All the financial institutions involved in the above have made money, and their profits are basically from the subprime loan bonds that the original company used leverage to operate, and these loans are ultimately all on the credit institutions and lenders. .

So only credit institutions and lenders lose money, and everyone else makes money. Ordinarily, the bank will not lose anything because of this, but the bank is also a credit institution, and even the fund company under the bank also invests in subprime loan bonds and so on.

When the lender defaults, the company that holds the insurance contract pays out.

Then the last picker was unlucky, and they had to pay for the insurance. It doesn't matter if there are only one or two defaults, they can bear it. But they never imagined that the default rate would be so high.

From a few percent to more than ten percent, how can the insurance premium be so high, not to mention that they still change hands layer by layer.

The last panxia family couldn't bear it and was about to go bankrupt, so it would spread upwards, and then spread to the entire chain step by step.

At this time, everyone started looking for a political axe. We're going bankrupt, doesn't the government care?

But if you think about it, how much insurance was received at the beginning, but the money paid out was tens or hundreds of times more than the insurance premium, or even higher.

What should the U.S. government do if they don’t have so much money? Simple, they have a giant like the Liangfang Group, so the Liangfang Group was forced to swallow such a bad contract.

If the government takes action, more and more fund companies that can't handle it will start to declare bankruptcy. Originally, some of their parent companies belonged to some large consortiums, and these losses were not unbearable.

But now that the political ax has taken over, it would be nice to just throw the burden out. Their financial groups still put their own interests first.

As a result, the bankruptcy situation is getting more and more serious. The number of corporate bankruptcy and personal bankruptcy is soaring.

It was also at this time that Obaniu announced a series of measures, all aimed at the poor, which attracted too many people to vote for him.

He also declared that it was a mistake for the United States to launch a war against Afghanistan. It would be fine if the battle was resolved as quickly as they expected, but after so long, it directly dragged down the economy of the United States.

Anyway, Xiao Bushi was about to step down, and at this time, all the shit bowls were put on his head. Many policies are decided by the National Congress, and Xiao Bushi's power is far from that great.

The members of Xiao Bushi's family are also working hard behind the scenes, wanting to hold off desperately, at least let Xiao Bushi step down safely, and then leave the trouble to the successor, so as to prevent this matter from being overwhelmed by the opponent when another candidate appears in their family. Take it out and criticize it.

The economic situation in the United States has become more and more serious, and Europe has also been seriously affected. Even UBS has lost money.

At this time, many funds simply escaped from the U.S. market and turned to the European market. In fact, this is also the reason why Europe has vigorously rescued the market, attracting these hot money to join in and making their economy better.

The reason why the economic situation in the United States is very good is also related to their ability to attract the most foreign investment in the world.

When those funds arrived in Europe, they joined the futures market as Feng Yu and the others expected, and the most invested ones were crude oil and gold.

After seeing the news, Feng Yu and the others relaxed a lot. It seems that crude oil has risen to about 100 US dollars, which is not a problem!

While Feng Yu was enjoying himself, a serious problem occurred in the business of one of Feng Yu's important partners.

... (To be continued.)

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