August 3, 2007 (LPAC)--A source working in several of the larger hedge funds in the City of London told EIR today that the entire street is in a state of denial about the crash. "They see it crashing, but they tell themselves it's just a 'correction' that was overdue. And, in any case, they welcome the crash--in fact, the thing they are worried about is that the governments might intervene to stop the decline. Hedge funds thrive on either rising or falling markets, but they lose when it's jumping up and down, which is what happens when the government intervenes regularly. The hedge funds bet on continuing trends, and down is fine with them."

Asked if it were not the case that the crash is destroying some funds and threatening them all, he answered: "Of course some will fold, and even the biggest, like Man Group, lost substantially last week. But they schedule in a few blows like this. Their statistical projections predict an episode like this once every few years. Of course, this is the third time this year--February, April, and last week--but I think LaRouche is right that nothing will puncture their fantasy about cycles, until they hit the ground."

The source also noted that it is absolutely the case that all the funds are holding the same positions, and now that this has built up so high, it is impossible to get out. If one tries to pull out, they'll all follow, and ... boom."