Payable to the City of San Francisco.

If someone doesn't pay the debt, then the insurance company will pay it for you.

So we still have the same amount of debt.

All we did was, we paid the interest on the debt in this example.

So it's a little bit more complicated than just saying, oh, look at that, they're giving a 6 coupon, which essentially means twice a year they're going to give me 3 of the value of my bond.

The government announced that they would pay their debts.

To pay off his debt,

And then year 10, I pay the 100,000 plus I pay back the 1 million.

But unlike mortgages, a lot of corporate debt, they just pay the interest.

My liabilities are this, you can view that as debt because

The money is to be applied to the debt.

And you say, this group of the CDOs, they'll get the first payments. or if any payments that go, immediately go to this very senior tranche, right?

Some percentage of these borrowers are going to default on their mortgage.

Now one thing I want you to keep in mind is, they get 10 only if every one of these borrowers pays their loans, never defaults, never pre pays.

That has nothing to do with it.

So it's only 10 , indefinitely, if all of the borrowers pay all the money and never default or anything like that.

So what they do is out of this 10 , they pay them some of the basis points.

And the reason they didn't grow by that amount is because we actually ended up having to pay taxes on some of that.

Because that's essentially what a credit default swap is, it's insurance on debt.

Choice 3, I am going to pay you I'm making this up on the fly as I go I'm going to pay you 20 today.

The orange slice is what's discretionary.

What happens if let's go to that scenario where we talked before 20 of the borrowers just say, you know what?

His debts amount to more than he can pay.

Even if it were able to offload these loans, it still does not have enough money to satisfy all of the demand deposits or all of the liabilities.

So actually, let me do that.

This is the debt, or the liabilities.

And so it would essentially be I gave them 100 thousand maybe to do some work for me it would be a transfer of money by giving a loan and then keep forgiving over and over it would be completely identical to giving someone a gift, which is taxed, or giving someone some type of income

Let me do that in red.

Her debts amount to more than she can pay.

That will now compound over the next month.

loans, they're not liquid.

Maybe debt that you have to pay in the next year.

But this I just want to show you some data here.

So that's bankruptcy.

You go get bankruptcy protection.

I probably wouldn't have noticed if you hadn't pointed it out.

Let's say I earned 100,000 in a year.

If I buy, if I directly buy a bond from a U.S. corporation, I'm essentially lending that money to the corporation.

And so when the Federal Reserve or any Central Bank prints money, and it buys debt, it goes out into debt markets and it buys it, it usually buys the safest kind of debt, but that affects all of the debt markets, it goes out and buys in the debt market, they're essentially shifting the supply curve of money to the right, they shift the supply curve to the right.

I'd like to pay the check, please.

I'll pay with travelers' checks.

So on day zero, you have a 200,000 loan.

Because after you've paid your final payment, you're done paying off the house.

But just answer your question, in the event of your death your family does not see the savings portion, they only get this payout right over here.

You're left with 500,000 of pre tax income.