Friday, December 9, 2011

Hypothecation, The Shadow Banking System and the Coming Financial Collapse

This is somewhat dense, but utterly essential reading. It provides great insight into the pending collapse of the Eurozone and its causes. Certainly Exhibit A, at least according to this article, is the lack of rules and limits in the U.K. on re-hypothecation, a form of "churning" which essentially creates money out of thin air by enabling the repeated borrowing off of the same collateral. Basic in its form and deadly in its consequences, how could this activity ever have been allowed in the first place?


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