Thanks CR,

Today's Round-Up was first meant to explain a bit more of what lies underneath the mess.

I don't know that it's much use to speculate on that inflation. The amount of credit pumped in is still quite small compared to total numbers.

I was just re-reading the 5-page PDF from Haylan that I posted up there, The Greatest “Bait and Switch” of ALL TIME. Very interesting file.

I think I finally understand what I'd been wondering about for some time: how did they get away with selling BBB as AAA? The answer given there is that they "..repackage them with a cascading cash waterfall so that the top tiers are paid out first on all the tranches".

All those banks and institutional investors are not allowed to buy anything but AAA. And they bought billions upon billions of lipglossed pork, BBB dressed as AAA. It's just that when you're very hungry, pork tastes like beef, I guess.

The ECB's strong action last week (and they pumped in another €50 billion today) has its roots right there: Europe's banks are riddled with toxic waste.

Any day now, I expect a waterfall of lawsuits to start shaking up the banking industry to the core. Who knew what, when? Sue the bank-manager, or the investment house, the ratings agency, or go straight for Greenspan? There are scores of top lawyers looking at the options as we speak. And there will be victims.

This is how it will begin, soon, with a massive obligatory sell-off:

"These institutions have these investments marked at PAR or 100 cents on the dollar for the most part. Now that the underlying collateral has begun to be downgraded, it is only a matter of time (weeks, days, or maybe just hours) before the ratings agencies (or what is left of them) downgrade the actual tranches of these various CDO structures.

When they are downgraded, these foreign buyers will most likely have to sell them due to the fact that they are only permitted to own “super-senior” risk in the US. I predict that these tranches of mezzanine CDOs will fetch bids of around 10 cents on the dollar."