The rating agencies miscalculated the value of asset backed securities.

America exported its toxic mortgages around the world, in the form of asset backed securities.

Homeowners, backed by rising house prices, are piling up debt.

Government debt will no longer be backed up by taxpayers assets.

Until recently, public debt was considered the ultimate safe asset.

In the US, the Term Asset Backed Securities Loan Facility (TALF) program and the Public Private Investment Program (PPIP) were in effect debt forgiveness schemes aimed at sub prime mortgage holders, but on too small a scale.

In the US, this happened when investors discovered that even AAA rated asset backed securities were in reality risky.

At that point, government debt will no longer be backed up by taxpayers assets.

The investment banks blended these securities into asset backed securities and collateralized debt obligations (CDOs) and sold them on to financial institutions throughout the world. These institutions, attracted by the high rates of return that were promised, invariably neglected the downside risks.

The national debt has increased, with no offsetting asset placed on the government s balance sheet.

Once the portfolio was assembled, we sold the projects to a special purpose vehicle called CRC Breeze Finance, which issued 470,000,000 of asset backed securities.

In Europe, particularly Germany, a mortgage backed security ( Pfandbrief ) is an ultra safe asset, as normally banks finance no more than 60 of a house s value.

Indeed, restructuring undermines the foundation of the entire financial system the safe asset role of sovereign debt.

An integrated asset liability structure is needed that also encompasses domestic debt and off balance sheet items.

That way, wage income, not debt and asset price inflation, can again provide the engine of demand growth.

The dysfunctional credit markets caused by the uncertain value of asset backed securities means that banks and other financial institutions are unable to raise funds and are unwilling to lend.

The European Union s approach to bank regulation encouraged financial institutions to load up on government debt supposedly a risk free asset.

And now European Council President Herman Van Rompuy, backed by most of the troubled eurozone countries, is again proposing Eurobonds and debt mutualization schemes.

The asset backed commercial paper market came to a standstill and the special investment vehicles set up by banks to get mortgages off their balance sheets could no longer get outside financing.

The collapse of asset bubbles in the 1990 s left Japan s financial system and private sector saddled with a huge debt overhang.

An asset diet rich in equities and direct investment and low in debt cannot substitute for other elements of fiscal and financial health.

It could do so because its economy, apart from its excessive debt burden following the collapse of an asset bubble, was basically sound.

Second, wealth effects are maximized when debt service is minimized that is, when interest expenses do not swallow the capital gains of asset appreciation.

The similarities are large trade deficits, manufacturing job loss, asset price inflation, rising debt to income ratios, and detachment of wages from productivity growth.

Adopting a market oriented approach and making the debt the responsibility of a commercial enterprise is the same as cutting a non performing asset.

And the market is prone to temporary fits of shared enthusiasm for emerging market debt, for Internet stocks, for residential mortgage backed securities, for Greek government debt. Traders need not wait to see when or whether the profits materialize.

Financial globalization meant that banks no longer held assets like mortgages on their books, but packaged them in asset backed securities that were sold to investors in capital markets worldwide, thereby distributing risk more widely.

Banks often oppose higher equity asset ratios, because equity capital is more expensive than debt capital. But this is precisely because of the lemon effect.

China Backed Mega Dam

Second, it increases global asset demand, generating asset price inflation.

But it is union weakness that has caused wages to stagnate and forced America to rely on debt and asset price inflation as the engines of growth.

The asset that is purchased need not be a physical asset.

For the distressed southern European states, the German backed mixture of austerity and structural reforms is proving fatal, because the decisive third and fourth components debt relief and growth are missing.

The company s debt asset ratio leapt from 18 to 90 as company reserves for long term development essential in the telecoms industry were used to service the loan.

Asset recovery

Asset management

How did this happen? They note that, in general, debt levels and leverage rose during the decade preceding these crises, propelling increases in asset prices for a long time.

In addition, there is the 3.9 trillion in debt owed by America s government backed housing finance agencies (Fannie Mae, Freddie Mac, and others), which currently underwrite more than 90 of all US mortgages.

Low debt and high liquidity should be valued for avoidance of cash flow distress, ensuring greater flexibility in adjusting asset allocation, and creating opportunities in the aftermath of a crisis.

These asset bubbles were inflated by lax lending standards and an excessive willingness to borrow, which seemed similar to the Greek government s willingness to take on debt to pay lavish pensions.

The last time Déjà Dup backed up

The Russians openly backed Annan s peace initiative.

The Incredible Vanishing Asset

Financial bubbles emerge wherever liquid asset markets exist. Indeed, the objects of such speculation astound the imagination tulip bulbs, gold and silver mines, real estate, the debt of new nations, corporate securities.

On the balance sheet side, even if a temporary decline in long term interest rates pushes up asset values, debt burdened households with uncertain employment prospects are unlikely to rush to consume.