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The Short of the New Banking Crisis

The latest round of bank failures will be explained by MBA-types using abstractions and jargon of which the average consumer will only feign understanding. The reality is that the financial system is a Ponzi scheme not at all dissimilar from Bernie Madoff’s. Decades of cheap money (low interest rates) have created an addiction to debt, leverage, and over-extension (think sugar-binge).

Now that the Fed has taken away the sugar (raised interest rates), an economy that they built on free samples is now jonesing for a fix and the DT’s are kicking in.

Outside observers have noted for years that the Fed did not fix the problems that created the crash of 2008, but only kicked the can down the road by pumping yet more money into both the public and private sectors of the economy (and by more, we’re talking at least fifteen trillion dollars of low interest loans that did not create reciprocal value in the economy.).

Although the Fed is taking half-measures to prevent an overall run on the banks, the most likely outcome is that we’ll see a majority of regional banks fail or be absorbed by the megabanks (JP Morgan Chase, BOA) driving the world further toward monopolistic control by global corporations.

Worst case scenario (that will happen eventually) is that the Fed allows the Dollar to bottom-out and be dropped as a preferred reserve currency, finally and permanently ending the hegemony of the American financial system. Considering that the four largest banks in the world are Chinese, it’s not out of the bounds of reason. It’s only a matter of time before the private banks that control the Dollar decide that their perennial pursuit of power and wealth lies with the Yuan.

“No one gets upset when everything goes according to plan – even if the plan is horrifying.” — Joker