The null spiral

Wall Street isn’t even pretending to be connected to the actual economy anymore:

Fresh from Wall Street’s alchemy labs: Credit derivatives tied to General Motors Co. debt. The rub is, no such debt exists. Banks and hedge funds are trading credit-default swaps, which make payments to holders of General Motors bonds in the event of a default. But GM canceled $40 billion of debt in bankruptcy and has pledged to cut its remaining $4.6 billion bank loan to the bone this year.

In other words, Wall Street investing doesn’t even rise to the level of gambling anymore. It’s as if the bookies of Las Vegas decided to start taking bets on imaginary football teams instead of NFL teams during the upcoming lockout.

“Hey, I know you bet the farm on the Minneapolis Norsemen to cover the spread against the Wisconsin Puckers, but wouldn’t you know it, the Puckers won, 111-85… oh, wait, football. That is to say, 27-10.”

This can’t help but bring to mind the obvious question of what percentage of GDP happens to be imaginary.