From 8 min 25 secs…
So we have a motor here on the left… and it goes through a gear train… there are 12 pairs of 50:1 reductions… so that means the final speed of that gear on the end is so slow that it would take 2 trillion years to turn once, so I’ve embedded it in concrete because it doesn’t really matter – it can run all the time.
That’s no problem when this pyramid is full and everyone is paying their mortgages – but if only 30% pay then suddenly… at the end of the month this row… is generating zero. Now he has his own pyramid… that is to say he has his set of investors to satisfy but unfortunately when you have… nothing at the end of the month… then nothing is filling the top, nothing is filling the second row, nothing is filling the third row and yet they are still rated as if they were as safe as the original asset. Now this is the problem… 100s of millions of dollars have been invested in this kind of secondary CDO… investment managers… have hawked these bonds… all over the world… the net result is these investors… have packed our funds with these securities which are not paying anything now and are liable never to pay anything again especially if the situation in the housing market persists… The fact is we are in a mess of our own making.
