As I wrote to my cousin today, a big part of our current economic problem is that the banking regs aren't being enforced. But another HUGE problem is that the repeal of Glass-Seagall made it possible for banks to generate Mortgage-Backed Securities (MBS) and other derivatives that eventually were worth next to nothing, but with a total notional value of hundreds of trillions.
The total notional value of all derivatives (not just MBSs) is estimated at about $600 trillion:
That is almost 10 times the entire world GDP! In other words, they do not represent actual value at all, because there is nothing on earth that can pay for them in real money. That is called leverage and in its current embodiment, it is a horrible scourge equivalent economically to the Bubonic plague.
If the banks holding these (only about 4 major ones) ever are required to sell, guess what?
There will not be enough money on THIS planet to bail even ONE of them out.
At that point, the Fed or IMF may go on a printing binge, but if God is merciful, the banks will simply crash and we will be rid of the Frankenstein created by our government in tandem with its greedy cronies in the corporate world.
Don Hank
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