266 comments on DrumBeat: March 24, 2008
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266 comments on DrumBeat: March 24, 2008
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Sure, but the financial system doesn't 'collapse' without more growth. We've had years of no or negative growth without collapse.
Think Great Depression ... the most recent deflationary episode in history ...
Recessions are just mild stagnations, not deflations. Government now accounts for over 25 % of economic activity and this will go on. The markets that are now in trouble however are many multiples of the US GDP, even the world GDP ...
The derivatives market is now 500 trillion dollars and is essentially freezing up. The entire world GDP is around 50 trillion. The destruction of this amount of debt will overwhelm the entire world.
Then you will have a crash due to debt destruction.
All because of "debt based leverage banking' misnamed by the banks as 'fractional reserve banking'. Levarage up, leverage down ... Some of these banks used derivatives to leverage out 30 times or more, Citi for example. Now the underlying assets (loans) are bad the destruction of money is at 30 times.
There hasn't been a 'panic' or 'depression' in most Americans lifetimes so you don't have a frame of reference.