|Reduction of value of money caused by securitization.
Document of obligation is a contract that is written when we borrow money.
(Contract between debtor and debtee.)
Those who can use money are changed from debtee to debtor by borrowing, but amount of money is not changed, so value of money is stored.
If document of obligation is securitized and market transaction can be
done, document of obligation becomes equal to money. As document of obligation
has right to receive (to be repaid) money in the future, it should be regarded
as future money.
As the future money becomes equal to present money, future money is included in present money. Money that can’t changed for any static value occurs. It reduces value of money and price rise, exploitation, bubble and so on are happened.
It is the root of subprime loan problem. If financial institutions keep
housing loan bonds without securitization, amount of money doesn’t increase,
so in case of default of paying back loans, deficit amount is only the
But as housing loan bonds are securitized, amount of money has been increased.
(Revolving between future money and present money occurs).
As a result, deficit amount of uncollectible housing loan has been increased. (Deficit amount is (number of rotations +1) times as large as amount of uncollectible housing loan.).
Securitization is risk increase factor.
Equity should be changed to loan of issuing firm. Issuing firm should buy
back all equities at market value.
To trade documents of obligation issued as a substitute for equity in the
market means occurrence of money that can’t be changed for any static value.
(As future money is included in present money.)
Therefore, it should be prohibited to trade documents of obligation issued
as a substitute for equity in the market.
Banks allocate a part of unrealized gain of stock holdings to owned capital. But if equity is changed to loan, it can’t be allocated to capital. As a result, capital increase to cover decline in stock prices is not needed.
Owned capital decrease caused by decline in stock prices is result of risk
increase by revolving between future money and present money.
Decline in stock prices. (Future money decrease)
-->Owned capital decrease. (Present money decrease)
-->Necessity to increase capital.
Value of money is stabilized to prohibit changing future money for present
money. As a result, financial crisis can be eliminated.