I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.
Friday, November 18, 2011
I sincerely hope. . .
. . . that this is not true:
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3 comments:
According to a Drudge item, the Fed is leveraged 51:1. I can't imagine the magnitude of the crash that is coming if we don't get federal spending quickly under control. The $1.2T "supercommittee" is laughably small. Ron Paul's $1T in one year is a good start but not enough.
J. Ewing
I remember back in the 70's the Europeans would look at America and sniff, "Americans don't have debt, they have CREDIT." They'd also say, "In Europe, if you have five dollars, we'll loan you one dollar; in America if you have one dollar they'll loan you five."
Where did all that perspicacity go?
where? the welfare state, and the need to get reelected in a democracy.
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