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New I've got it! Lottery tickets!
OK, you've got these loser companies that nobody wants to own stock in, because the stock's worthless because nobody wants to own stock in them.

So it looks like the only way to turn the market around it to do something stupid involving having the government buy up the crap assets, and there is all this "
oh, what can we do" where they are trying to figure out what value to put on the assets, because if the government pays too little the private interests aren't going to invest and if they pay too much, well, they pay too much. Like most dilemmas in the real world, this one is a result of trying to lie. The assets don't have a value because they are crap, not because nobody is smart enough to figure out the value. The value is JACK. The lie is that it is something more.

So here's my solution. The government buys them, but not for cash - for lottery tickets. Let's say you have an asset with a face value (or equivalent pretend value) of a billion, that's maybe worth 10M. The asset is converted to lottery tickets. One lucky holder gets 20M and everybody else gets receipts that can be recycled.

Look into the psychology of lotteries. It works. Granted, it doesn't work with people who are paying attention, but these are people who bought derivatives they didn't understand.

New That makes a lot of sense.
It's a shame it won't work. :-(

As you say, a lot of the toxic assets are worthless. They're still on the bank's books as having some value and contributing to the bank's capital. As I understand it, if the banks have to put them into a scheme and that scheme values them at something approaching their "real" value, then banks risk being (finally) recognized as insolvent. At that point, they're out of business. And other banks that count on their investments in that bank as having some value are forced to recognize that that investment is damaged. And so on.

The lottery tickets idea has an appeal, but doesn't help the "every bank owns a piece of every other bank" problem.

That's why the Treasury is continuing to tinker with TARP and so forth. They want to keep the banks operating, somehow, without the system imploding. Maybe they're thinking that something like Japan's Lost Decade wasn't such a bad outcome after all. http://krugman.blogs...pan-reconsidered/

Cheers,
Scott.
     Wow... bold... Dow 4000 - (folkert) - (9)
         Where are the people talking about wealth creation? - (drook) - (8)
             That's 20th Century thinking. Get with the program! - (Another Scott) - (7)
                 I've got it! Lottery tickets! - (mhuber) - (1)
                     That makes a lot of sense. - (Another Scott)
                 Let's talk real economy - (drook) - (4)
                     Understood. - (Another Scott) - (3)
                         I got the sarcasm - (drook) - (2)
                             go to vegas, your chances are better than the market - (boxley) - (1)
                                 Good point - (drook)

And monkeys could fly out of my butt.
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