We Brits are naive with money - we're so unused to having any - our Government has always looked after it for us. Perhaps this is why there are so few Brit blogs that help us understand finance.Speaking of ruinous government help, Karl Denninger describes a trap that seems likely to bankrupt General Motors.
It seems that people who own GM's corporate bonds have an incentive to let the firm collapse: their losses will be made good by the equally-bankrupt former financial giant AIG, through Credit Default Swaps (CDS), which are insurances against default on loans. In its panicky attempt to keep the financial system functioning normally, the US Government has effectively become the guarantor for AIG's CDS contracts. So creditors of GM can expect 100% return of their capital.
Better still, once GM goes under, the bonds are unlikely to become entirely worthless. So GM bondholders will get 100% PLUS...
And this means that the Government's "help" is about to ruin a huge manufacturer and employer.
