More cheery economic news

Short version

There’s a greater than 50 percent probability that the financial system “will come to a grinding halt” because of losses from mortgages, Gregory Peters, head of credit strategy at Morgan Stanley, said.

Long version – from The Oil Drum, a comprehensive look at the credit crisis and the dominoes about to fall next, specifically bond insurer companies.  One unbelievable fact, a bond could be worthless, but if a bond insurer insures it, then the bond assumes the AAA rating of the insurer.

Except now the bond insurers are in trouble. If they lose their AAA ratings, then pension funds and other such entities are legally required to sell bonds insured by them because those bonds will no longer be AAA-rated. Sounds like a giant Ponzi scheme, doesn’t it?