Financial Engineering

Here is a piece of land. If you know its price will double in a year, of course you would like to buy it. If you want, everyone wants, too. One year has passed and you find the price actually doubled in a year. Why? It's just a result that the things followed the law of supply and demand(需要と供給の法則). Everyone wants to buy it because they know its price doubles in a year. You made money. Nothing seems wrong with it.
If you do not have enough money to buy it, don't worry. You can borrow the money from a bank. If by any chance you can't pay back the money. Don't worry, you can sell the land at much higher price than when you bought it. You can pay it back and have extra money left in your pocket. The bank is very happy to lend you because it has no worry of debt default(債務不履行）.
Banks always anticipate the worst. They made a part of your loan into securities and sell them all over the world. That is to say the bank does not really lend this part of the money to you. Broker houses or ordinary people who buy the securities do. So banks are safe. You are safe. Everybody is safe.
However, don't you think something is funny? Yes, all of these relies on the assumption that land price will rise in the future. When it fails, everything standing on it collapses.
The first part is what we call bubble economy. Japan experienced the burst of it in 1990s and now the United States is suffering. When Japan was struck by the burst it was just a problem of herself. But the collapse of US economy has not stayed within the country but spread all over the world by way of the second part, securitization of your loan.
The value of the securities was after all backed up by the value of your land (and the house standing on it) which is mortgaged(抵当) for your loan. When the value started to drop, the value of the securities also fell. It was the start of the turmoil. Everyone who bought it started to suffer a loss. People are now afraid of the recurrence of the Great Depression(世界大恐慌).
If you knew you were betting money on the land in US, you might be able to feel the risk of it. But if you just buy the securities, you cannot feel the risk of it any more. You may as well trust it because it was sold all over the world on a scale of a total hundreds of trillions of yen and sold from a reliable brokers such as Lehman Brothers which is graded AAA by credit assessment agencies(格付け会社). Thus uncountable number of people were deceived and lost money.
This securitization scheme is called "financial engineering". It sounds academic. But what it does actually is very much similar to a fraud. It covers up the reality with a complicated scheme. People tend to trust more complicated scheme because they construe it as more sophisticated. They even more trust it if it is the result of "financial engineering". So they are the victims of the fraud that is done on a scale unprecedented in the world history, carried out by the accomplice of banks, broker houses like Lehman Bros, and credit assessment agencies like Moody's.
Financial engineering is not engineering at all. It only disgraces the name of engineering. If you call it engineering, pyramid scheme(ねずみ講) is also an engineering. Is economics really a field of study that is placed on the same level with physics or chemistry? I doubt it.
I heard one of the men who made up this fraudulent technique won the Nobel Prize in Economics. I resent it. Nobel in the first place did not intend to honor Economists. He was right. It was a bank in Sweden that created Nobel economic prize. It also disgraced the name of Nobel Prize.