Schrodinger's subprime mortgage.

So the economy’s screwed.

That’s because quantum economics doesn’t work…

Quantum mechanics and the “duel state”.

In 1935 physicist Erwin Schrödinger put forth a thought experiment to explain a quantum duel state:

A cat, along with a flask containing a poison and a radioactive source, is placed in a sealed box. If an internal Geiger counter detects radiation, the flask is shattered, releasing the poison that kills the cat.

Quantum mechanics implies that after a while, the cat is simultaneously alive and dead. Yet, when we look in the box, we see the cat either alive or dead.

It is only the observation of the cat that causes the collapse of all other possibilities.

What the hell is subprime?

wikipedia tells me that Subprime lending means making loans to people who may have difficulty repaying.

These loans have higher interest rates in order to compensate for higher credit risk.

(The poor pay more making it even more likely that they can't pay it back)

It was dealing in subprime loans and mortgages that led to the trouble we’re in now.

Subprime is one of those words that illicit no emotion.

It’s not one of those words you feel when you hear it.

Say it to yourself…”Subprime”…Meh? I feel nothing.

It’s easy to take the word to bits,

Sub: - under, less than, secondary

Prime: - good, best etc.

So subprime means less than best, or not good.

Subprime mortgage? Meh? Not good mortgage? Ah, now I’m feeling it.

So if everyone in all the money markets around the world called these things not good mortgages then maybe we wouldn’t be in the state we’re in. “Wanna buy a 1000 subprime Florida mortgages?” “Er? I’m not sure.” “Wanna buy a 1000 not good Florida mortgages?” “No thanks.”

But these things were bought and sold.

The banks would give anyone a mortgage without really asking if you could pay it back, then bundle that mortgage up with a bunch of other crappy mortgages and sell that debt on the market.

And then that would get sold on (for a profit) to someone else who might split it up and sell it, or bundle that up with a bunch of other crap and sell it on again (for a profit)

This works?

This does work as an economic model.

Buy and sell whatever you like. Sell it on for more. Pay more, mark it up again, collect a bonus, buy some more and sell again for even more and collect another bonus.

It works as long as you and everyone else never, ever look in the box. Then it stops being what it could have been and starts being what it is.

An IOU from someone who can’t pay.

It’s quantum economics.

According to the documentary at the bottom of this post someone in France opened one of these boxes.

I imagine it went a little like this...