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It is in the interests of financial intermediaries to dis-intermediate because this minimises their capital requirement.

That works only as long as that is their priority. As we can see in the current crisis raw power can be put above all other considerations.


That is why they are doing it. That is why there are $3 trillion - yes trillion - in exchange traded funds where market risk has been outsourced to investors.

This is a measurement of success. But how much would this be as a percentage of the traditional model?

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by A swedish kind of death on Mon Feb 18th, 2013 at 03:18:40 AM EST
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Continued economic growth is hard-wired into the corporate world, and the corporate world pulls the strings of today's governments. But continued economic growth is impossible with existing levels of conventional finance capital, which is why investors are moving to the adjacent possible of quasi-equity ETFs and so on.

When these funds fail, having ironically caused the very inflation they aimed to 'hedge' - ie when the current asset bubbles end - investors will move on again to the next adjacent possible, which is already discreetly in wholesale market use ie Prepay.

This completes a 'Back to the Future' circle - since prepay instruments pre-date modern banking - to the Last Big Thing of direct 'Peer to Asset' investment.

The US National Debt is over $11 trillion, so $3 trillion is getting on for 30% of that. Most of this money is swilling across from the $trillions in 'Money Market Funds' now getting negative real rates of interest.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Feb 18th, 2013 at 06:50:19 AM EST
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