These bonds are fine if they're rated properly. On the other hand, if your rating system is not functioning properly (as was true in 2008) then any product that needs rating is suspect, only investments whose provenance you can directly investigate yourself are safe in that case.
Maybe we can blind the rating system? If Standard & Poor can't tell whether this instrument they're rating was created by HSBC or me in my basement, they may take a few seconds more to consider whether the scent of shit is because it is in fact just shit in a thin paper shell.
And if you blind them but they still don't give true ratings you can trivially exploit that to fill the market with highly rated shit, destroying the market but leaving the real economy largely untouched. Rinse and repeat until all the dumb money is sucked into your pocket.
Maybe we can blind the rating system? If Standard & Poor can't tell whether this instrument they're rating was created by HSBC or me in my basement, they may take a few seconds more to consider whether the scent of shit is because it is in fact just shit in a thin paper shell.
And if you blind them but they still don't give true ratings you can trivially exploit that to fill the market with highly rated shit, destroying the market but leaving the real economy largely untouched. Rinse and repeat until all the dumb money is sucked into your pocket.