[syllogism]

> No, I'm correct. The market always buys value, and historically always has. The sole question is price.

https://en.wikipedia.org/wiki/Keynesian_beauty_contest

https://en.wikipedia.org/wiki/Pluralistic_ignorance

The market can't buy value if everyone believes everyone else believes that the value isn't there. (Actually you can go any number of layers of belief; what you need is shared knowledge, in the sense logicians use the term.)

Everyone in the market is trying to guess what everyone else in the market will do, who are also trying to guess what the market is doing. Once you crash, you don't just need sentiment-of-value to improve, or even sentiment-of-sentiment-of-value. You need sentiment-of-sentiment-of-sentiment...etc.

So, you can get grid-lock. Which is why you need the government to step in.

[bko]

I think the Keynesian beauty contest is less relevant for structured products. If others don't share the same view of the underlying collateral you may not be able to sell them in the near future. But if the collateral performance meets your more optimistic viewpoint, you will be compensated and eventually the bond will be paid off. The securities aren't like equities with some some arbitrary value associated with them that can only be captured through sale to another party (excluding dividends, buyouts, etc).

There were probably a lot of structural issues that prevented many of the large players to purchases these assets though (mostly liquidity). This is probably the justification the Federal Reserve used to purchase said assets.