I wrote the following elsewhere:
The U.S. has a regulated capitalistic system, we haven't had a free market system since the depression.
But when I said there was more to this than just sub-primes, this is what I meant:
Now add to that that the banks were basically leveraging the dollar 120 times and you get how bad this is.
For the past few days I've been wondering how the failed banks and brokerages could be going under and it was starting to slowly hit me: they got CALLED. Just like the day traders who were leveraged to do their trading, and the brokerage calls the traders and say we want our money; NOW! Only the day trader doesn't have the money and then the mini-storm happens.
Then came the run on the money market account, sending it down to $0.97 instead of the target $1.00. Since then I've been wondering how many times a bank "loans" $1 for each $1 they take in and the numbers I've read have been said to be at least 80 times.
Now it's sinking in. Now it really makes sense. Now I know WHY the banks and the brokerages have been taking the money the Fed has been offering. It ain't just the "free money" aspect of this, they are taking the money in case of a run!
Ron Paul's a racist mo-fo or, at least, is associated with some racist mo-fos, but he's right.
My analogy for this mess is this. Think of what is happening as a gear system to a car. First gear only gets the car moving and the other gears do the real job. Sub-prime was the 1st gear toward moving to the financial meltdown.
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