Shadow Banking and the Austerity Crisis

Blogger Jrcnyc, has an eye popping assessment of the shadow banking industry and the volume of capital that has effectively withdrawn from the world’s economies.

In the first instance he notes the vanishing of 6 Trillion USD from global credit markets; followed by the US Federal Reserve loaning out 16 Trillion to US Banks in the Aftermath. There’s a moving target here and no one seems intent on calling bullshit on the people holding the purse strings:

The stunning size of $20 trillion here and $16 trillion there (and $32 trillion over there) should make the Washington frenzy around national deficits appear for what it is: a stage-play for the public, an art show, a reality television program. People fall in love with the players – President Obama, Paul Ryan – because the meaning of the soap opera is supposed create a convincing “history” for how we can explain to ourselves, in a few years, why we cut retirement care for ourselves and made ourselves work longer.

And its about to get a whole lot worse. Instead of prompting a massive drive to transparency in the wake of 2008, more money has disappeared into what is euphamistically called “off-balance investment vehicles”.  This is a money market that amounts to nearly 67 Trillion USD. And on the off-chance you’re thinking that Jrcnyc is full of it — these are the figures gathered and published by Bloomberg, Deloitte, and the Economist. If enough instablity in even one of these funds leads to a 10 per cent default rate you can kiss your ass goodbye, 2008 will look like a sunny holiday in comparison.

For more I highly recommend thedailycrowd blog:

The $700 Trillion Joke: Shadow Banking and the Austerity Crisis « The Daily Crowd


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