Well, ZeroHedge is most often "the first with the worst" but this time it's taken them 6 or so years to say what Todd Harrison and I've been saying all this time:
http://www.zerohedge.com/news/2015-03-1 ... y-was-bornSince the crisis, banks have been allowed to "mark to model", or in other words, fantasy*, as they are all, even after front and backdoor bailouts, utterly insolvent. It's all air, people.
This was, and is, "
the dog that didn't bark". The first bank to actually be solvent would be
shouting it from the rooftops as it would make them look good and draw business from their competitors. That this is their main mission in life should have been made obvious by sub-prime lending and CDO's in the first place - once you let one guy do it (Fannie), everyone else MUST, or lose market share. No, no one forced them, just as no one forces them to stay in business...but in another way, yeah, it's force.
As a side benefit, this little regulatory change has allowed insolvent institutions to pay unconscionable bonuses to bankers for "profits" that are utter illusion. It makes people think of rope, and guillotines. But the pervasive NSA snooping isn't about protecting we small people from foreign enemies, it's the total wrong pattern for that. It does make a lot of sense, along with those huge ammo purchases by DHS - that they are planning to protect "the elite" from us, who are getting a little sore "back there".
This thing has held up longer than any of us in the know thought possible, it seems people have that particular cognitive bias "normalcy" or some version, and keep believing the lies. Let me tell you - if you pulled all your money - all of it, and only a few percent did so (yeah, they make it hard with taxes on IRAs and such, warning lockup times on hedge funds and now the same for money market) - the whole thing would crumble overnight. But "the market can stay irrational longer than you can stay solvent". I'm beginning to wonder if the tax penalties might not be worth it, as in, we've already passed bail-in laws (banks can just take your money directly vs doing it through the taxpayers as before), and who knows? After tax money is still money, that other thing - zero, nada, zip. You know where all the actual, more or less unencumbered cash assets are right now? Yup, retirement funds. No one else has real money, it's all rehypothecated loans (eg using the same collateral more than once to borrow more money - most banks are in the 30::1 range now, it's worse in London and elsewhere).
Yes, banks are carrying as "assets" loans that haven't had a payment in years on houses with no windows, no plumbing, no wires, 6 foot grass, crackhead squatters as "good loans" on their books, that will be paid back, on entire neighborhoods that will never recover (and in fact, municipalities are talking about bulldozing to keep the rest of the area nicer). That's the least of it. Yes, guys like Paulson said if they didn't get their way, there'd be a disaster - his words were "tanks in the streets".
Yes, it will be very hard on people who, unlike most of those here, have no idea how to create things of value to others, but only a knowledge of arcane man-made regulations and rules and how to push paper around. It's really going to finally hurt to be meaningless, which would include nearly all of the fear-mongers about financial collapse.
Think about it - will one person here who knows how to twist a screwdriver lose that ability? Will my solar panels stop working? My lathe? My brain? Nah, I'll be fine, along with my farm-country friends. We've been bartering my output (fix computers and tractors and all between) with theirs (food and manual help) for years already. If your main asset is money - I strongly suggest you get it into a form you can hold personally. Negative interest rates are not unknown even now, and bank of mattress never looked better, even for likely to lose value FRNs. I like stashing my value in other things - tools, supplies and so on, but a certain amount of plain old cash also seems wise.
OK </rant>
But don't say I didn't warn ya. It's a matter of time - we just don't know how much (and often, that's the only really important question, so all I can say is - sorry, I don't know).
*those who think that the models have to be in any way realistic probably believe the "new" on a 30 year old box of cereal in the basement. I can't help you.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.