Too Big to Fake

The too-big-to-fail banks are much bigger than they were in 2008. Remember all that talk about the need to pare down banks because gigantic banks are a systematic risk to the world economy. If one fails, the financial system collapses. The bubbles have been re-inflated to even greater lengths.

If the USD goes down, 90% of nations fall with it.

The housing bubble, stock bubble, treasury bubble, high yield junk bond bubble, etc are now back to what it was in the US or even bigger than it was before the financial crisis. The longer the bubble doesn’t pop, the bigger it gets, the greater the damage will be when it does pop.The entire world economy and asset prices are entirely propped up by central banks ( QE + low/negative interest rates ).

It’s strange how we invented a system that can create so much trouble, when the resources, technology and working people still remain the same.The government is heavily influenced by industry — — the very industries that benefit from these insane policies.

Then, the public purse is used to support inflationary fiat money and systems like QE and the financial industries massively benefit from it — — until the crash. Which is bailed out by the public purse.

It only makes sense if you still think the policies are designed to primarily benefit the average voter. Clearly, they aren’t.

The reset is inevitable

What’s the first reform that a country can put in place first? Make sure they face the consequences of a poor choice to take on too much risk? If a company wants to play the Silicon Valley startup lotto or invest in high-return high-risk loans, that’s up to them, but if they go broke that’s on them too. The idea is businesses that manage risk responsibly will survive while those that do not will lose money and go out of business or be bought by the responsible ones.

On the other hand, some feel that the government should pass laws limiting how much risk a business can take on, and set legal requirements so that businesses cannot take on a degree of risk determined to be against the public interest. This approach has merits, of course, and pitfalls. The merit is unlike the solution above if you do it right no businesses have to fail and no one has to be laid off. The downside is the risk of getting in an escalating accounting arms race as the businesses try to outsmart the regulations to increase profits.

Other options fall somewhere in the middle, ranging from the government providing certain assurances or protections while allowing the businesses free reign. We did that more or less last time, the problem is the business gets to pass off the negatives but they keep the positives, and thus they have no incentive to be responsible.

But they will push the reforms that after saving the banks again you can no longer afford any public services. They will all be sold off and every aspect of your life will be financialised to pay for it. Which in turn puts the entire economy on hold after which the government will attempt quantitative easing. Those financial injections , however, will be administered top down and most of that money won’t be seen in the ‘real’ economy, rather it will flow straight into the assets of those who can afford to speculate and yeah, generate a new bubble.

I don’t believe there are any possible reforms that won’t let it happen. A financial reset is inevitable.