Shadowbanking: the infrastructure and practices which support financial transactions that occur beyond the reach of existing state sanctioned monitoring and regulation. Investment banks conduct much of their business in the shadow banking system and because of shadowbanking it has been common practice for investment banks to conduct many of their transactions in ways that don’t show up on their conventional balance sheet accounting and so are not visible to regulators. Meaning, NO SAFETY NETS on loans that were created without any underlying money! Yet without these loans many of us wouldnt be able to afford a lot of things, and therefore shadowbanking has become very important to our economies and now it is dire need of a bailout (as seen with many many bailouts as of recent) or the consequences will be pretty, well…DIM.
Thus, shadowbanking is catching up to the world. Look to the EuroZone crisis: no safety net lending due to shadowbanking and very little or NO regulations. Hence, when the shadow tried to set (yes, the ‘shadow’ that grew and grew and grew without any sort of control) and it couldn’t keep up with the demand and the payouts, the system kinda failed….horribly failed. And this is just the beginning to some grim times ahead.
I mean, look to MF Global and how quickly they collapsed due to their investments in EuroZone (and EuroShadowbanking). Not to mention the recent
“I don’t know where to locate the $1.2BILLION of investor money at this time” speech by (now defunct) MF’s John Corzine. Gee, that is a lot of money gone missing! Imagine if all of the shadowbanking collapsed?! That would really really reallllyyy cause Occupy WallSteet, aka #OWS, to be up in arms!
What do you think? Did you even know you were borrowing from shadow banks? Or most importantly, did you know what would happen if this system failed?
Want more juice? Watch the Shadowbanking Video:
- The Scramble For US Safety, As Europe Imploded, Offset The $357 Billion Plunge In Q3 Shadow Banking (zerohedge.com)
- The Financial Crisis Was Entirely Foreseeable (zerohedge.com)
- The $30 Trillion “Problem” At The Heart Of Shadow Banking – A Teaser (zerohedge.com)
- China’s Shadow Banking System: The Next Subprime? (blogs.wsj.com)
- A Close Look At The Shadow Banking System (businessinsider.com)
- Why The UK Trail Of The MF Global Collapse May Have “Apocalyptic” Consequences For The Eurozone, Canadian Banks, Jefferies And Everyone Else (zerohedge.com)
- Has The Imploding European Shadow Banking System Forced The Bundesbank To Prepare For Plan B? (zerohedge.com)
- Shadow banking tops pre-crisis level (theglobeandmail.com)
- Mine: http://imdatingaonepercenter.com/2011/12/08/mf-corzine-1-2-billion-is-still-missing/
- Jon Corzine downfall: Even after 2008, banking sector has untamed risks. (VIDEO) (csmonitor.com)