Point to remember: if the banking system has a $500 billion dollar loss (and losses are already far beyond this), then given the 10 to 1 (or greater) leverage of fractional reserve banking, that's $5 trillion in loans that aren't going to be possible. Over the last several years, our economy has been completely addicted to massive lending. Even with trillions in lending, the economy over the last few years has been merely "okay". So what happens when trillions in new lending becomes impossible, thereby resulting in an economy that is less than "okay", thereby resulting in a decrease in asset values, thereby resulting in a decrease in bank capital, therefore resulting in additional 10 to 1 decreases in ability to lend? This is no longer a merely theoretical question.
Remember when just a couple of years ago it seemed that "everyone" was somehow getting rich from doing nothing? Now, all that phantom "wealth" is going back to where it came from.
Easy come, easy go.
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