Businessmen and women become afraid that stocks, and the values of the machines and factories that back those stocks, may fall further.

Consider investors in Fannie and Freddie bonds.

This is a clear demonstration of how derivatives and synthetic securities were used to create imaginary value out of thin air.

Let s not forget the essays in central banks stability reports on how credit derivatives were benefiting the financial sector.

Securities took the place of traditional bank credits.

During Japan s lost decade, the Bank of Japan mostly bought Japanese government bonds, whereas the Fed is trying to reopen secondary markets for securitized private lending (which in the US is as important as bank lending), buying mortgage backed securities and consumer and business loans, as well as U.S. Treasury bonds.

The Bank of England is buying UK government bonds ( gilts ).

The group calls their version of contingent capital regulatory hybrid securities.

The bonds issued by Fannie and Freddie were widely thought to carry an implicit US government guarantee.

Central banks can buy and sell dollar securities without moving those markets.

Unless the Treasury overpays for the securities, the scheme would not bring relief.

Investing fund surpluses in foreign securities would counteract the tendency for the exchange rate to rise.

Tailor made products could be put together from exchange traded instruments.

Surely there is at least as much natural demand for commodity bonds as there is for credit default swaps and some of the bizarrely complicated derivatives that are currently traded!

Their absence makes it difficult to invest too large amounts of money in Russian securities.

By buying government securities, the central bank injects cash into the banking system.

Mortgage backed securities were urged onto investors for whom they were too risky.

In its simplest form, the securities could be shares in GDP.

The dubious mortgage securities are so called mortgage backed securities.

Central bankers cannot explain equity or housing prices and their movements any better than investors can.

The rest was due to an 18 decline in deposits, with the loss of confidence mainly hitting state owned banks.

US banks finance up to 100 of a house s value, sometimes even more, and the sub prime market even includes loans to people without jobs and income.

The regulatory hybrid securities would have all the advantages of debt in normal times.

The sharp fall in long term rates induced investors to buy equities, driving up share prices.

By contrast, such US securities are like a lottery ticket.

Moreover, the issuance and trading of derivatives ought to be at least as strictly regulated as that of stocks.

Fear feeds on itself, and the prediction that stocks will lose value becomes self fulfilling.

By buying government bonds for cash, a central bank can satisfy demand and push down the price of cash. When there is no excess demand for cash, there will be no excess supply of the bonds and stocks that underpin and finance the economy s productive capital.

By buying government bonds for cash, a central bank can satisfy demand and push down the price of cash.

Hungry for growth, the bank itself and a hedge fund founded by the bank invested in US subprime securities.

We tend to think that new risk management products, such as novel types of insurance or financial derivatives, will primarily interest the rich, or at least relatively wealthy people.

Often, securities are created that are backed by sophisticated portfolios containing good and bad assets whose true risk cannot easily be assessed.

Derivatives can serve many useful purposes, but they also contain hidden dangers.

Derivatives traded on exchanges should be registered as a class.

Inflation protected securities are now being sold at negative yields for the first time ever.

Banks issue securities with attractive nominal interest rates but unknown repayment probability.

During those months of political dithering, US treasuries became a riskier asset.

They will have no enforcement powers and national governments are already finding ways to undermine their authority and (financial) capacity.

Ordinary securities must be registered with the SEC before they can be traded.

Paulson s proposal to purchase distressed mortgage related securities poses a classic problem of asymmetric information.

Tailor made derivatives would have to be registered individually, with regulators obliged to understand the risks involved.

But banks used the innovation to place transparent securities in highly opaque investment vehicles.

Some kind of penalty or subsidy thus has to be applied to encourage banks to issue them.

The fall in bond yields has extended to a far broader range of debt than just government paper.

But, because the Kremlin does not trust its own stocks and bonds, the Stabilization Fund invests in Western securities. Thus, the government loses its chance to modernize Russian cities, roads, hospitals, and universities.