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

Payable to the City of San Francisco.

This guy, he does have interest.

So we still have the same amount of debt.

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

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

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

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

You're still solvent.

They serviced the loans.

So the 300 million from equity, they're going to get 55 million assuming that there are no defaults or pre payments or anything shady happens with the securities.

The Spanish Victory Bond.

It was 1.6 million in bearer bonds.

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

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.

The yield on the bond is 6 .

The debt servicing cost on bonds will take up major portion of the budget.

We would create incentives for securitization.

Helps bring it down.

This difference between this AAA corporate debt and the treasury, that is the yield spread.

To pay off his debt,

You have 189,000 as the value of this equity.

Now let's say it gets even worse.

Have a surplus? Take two tax cuts, roll back some regulations and call us in the morning.

External debt something that I can tell you a long story about because I personally worked on one of the biggest debts on the continent has come down dramatically.

What is your strategy in your household?

Well everyone knows that it's not going to be exactly 10 .

So that's bankruptcy.

You go get bankruptcy protection.

It allows let's say this group of borrowers let's say this pool of borrowers right here actually didn't

First interest

Given a high level of bond issues, the cost to service them will increase.

It can do it through debt or equity.

I have 4 billion in residential CDOs, collateralized debt obligations.

Over the next few years big decisions will be made in Washington on jobs, the economy, taxes and deficits, energy, education, war and peace.

And at the same time, what keeps me up at night is a fear that we'll look at the victories of the G8 50 billion dollars in increased aid to Africa, 40 billion in reduced debt as the victory, as more than chapter one, as our moral absolution.

My mortgage actually might be something like 4,000 a month.

Is that the original Victory Bond?

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.

So, each of these is an investor.

It's exciting, but we went over our finances and...

That man borrows money from many lenders.

That man is a heavy debtor.

That man has many debts.

I know that interest rates are fixed in accordance to the borrower's business risk.