We all may have heard that our great Golden State of California is broke. Not only that the state is unable to improve its public services, the state was forced to issue IOUs to its vendors. Even though many state vendors usually overcharge the state for their services, I am sure nobody likes being paid with IOUs. To make the matter worse, banks had refused to take the IOUs since last Friday.
Today, MarketWatch reported that a broker had opened a secondary market for IOUs. Some people may think, "Wow, it's nice of them trying to help those IOU holders to cash their checks," but my first impression was whoever started the business sure knows how to make money from someone's misery.
Why? Because the dealer did not buy the IOUs for themselves, instead they basically merely created a marketplace for buyers and sellers of IOUs to meet, and reaped profits from the transactions. I don't know how many cents per dollar will the IOUs go, but I am sure not very high because of the risk of defaults and the facts that some IOU holders are desperate.
The winner? The broker dealer... No wonder the word "broker" has "broke" in it.
I guess the only way to survive in this economy is by becoming crooks.
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