Computers made meltdown possible?


Do derivatives come from exotic number crunching?
I'm not sure I agree with these conclusions, but it's certainly something to think about.

Without the computer revolution, local banks would give loans to local businesses and provide fixed rate mortgages to local homeowners, mortgages that would never be sold or packaged as securitized mortgages. Banks would require documentation that required proof of capacity to repay.

Usury would be outlawed; the financial services sector (FSS) would be less than 1/4 its size today. There would be no credit or debit cards; consumers would have to pay upfront for their purchases. Home owners would have built up equity in their homes and engaged in prudent investment and built up their savings. Their purchasing power would be much greater then than now. With average credit card debt of $12,000 for a family of four, the average family pays over $1000/year in interest on their cards. This means that the average income where famililies of four have any disposable income has risen from perhaps $20,000/year to $40,000/year. This has a massive impact on the consumer society.

Okay, computers probably did make the financial derivatives possible. But I can't help but think that something else (or someone else) might have had something to do with it too (not safe for work).

— NeoWayland

Posted: Sun - October 19, 2008 at 01:34 PM  Tag


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