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Posts Tagged ‘subprime’

Ludwig von Mises Institute

Upon discovering that the Ludwig von Mises Institute is a government-sanctioned and regulated tax-free 501(3)(c) organization, I looked for their publicly-available IRS disclosures.

Their latest complete tax-exempt filing available as of February 14, 2011, is for 2007.

Despite their talk of monetary inflation being bad in all cases, they owned $4 million in U.S. Treasury Bonds in 2007 (see page 17 of the PDF), which they all sold the very same year the subprime housing bubble burst.

It also shows that they owned a total of $291,164 in 32 other securities, with their biggest holdings being in PetroChina and Royal Caribbean, which they all sold at a loss in the same year, with the exception of their Allete Inc., News Corp, Buckeye Partners and AT&T shares.

It is quite possible that most, if not all, of these stocks were gifted by donors. Yet, it is an interesting portfolio for what it does and does not contain.

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Sign of a mortgage centre in East London

In 2007, when the so-called subprime mortgage market was collapsing, the natural question was, “what is a subprime mortgage?”

I discovered that it used to refer to what it sensibly means. Namely, mortgages with an interest rate lower than the prime lending rate.

Since then, the definition has changed to refer to mortgages of subprime quality. However, “subprime” is highly misleading, in that anything less than the best quality is subprime.

In the case of bonds, a triple-A credit rating is prime. Anything less than that, by definition, is subprime. However, there is a significant difference between AAA bonds, and BB and lower-grade bonds, to the extent that the latter are called “junk bonds.” Yet, according to the strict definition of subprime, AA+ and BB+ bonds are “investment grade.”

Banksters love twisting the meaning of words. Like their Federal Reserve System, which isn’t federal, doesn’t have any of its own reserves, and was called a system to obscure the fact that it’s a private central bank.

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