Why the Worlds Major Banks are on the Verge of Collapse

This I thought warranted its own thread - it explains why the current crisis is far worse than most people realise & why the banks are teetering on the edge of an economic abyss:

Around the world, banks must comply with what are known as Basel II regulations. These regulations determine how much capital a bank must maintain in reserve. The rules are based on the quality of the bank's loan book. The riskier the loans a bank owns, the more capital it must keep in reserve. Bank managers naturally seek to employ as much leverage as they can, especially when interest rates are low, to maximize profits. AIG appeared to offer banks a way to get around the Basel rules, via unregulated insurance contracts, known as credit default swaps.

ORIGINAL SOURCE
www.kitco.com...

Sorry, I actually found it on advfn but didn't want to link to a thread on a specific stock.



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[edit on 9-10-2008 by SkepticOverlord]

[edit on 9-10-2008 by Power_Semi]

Star and flagged, thank you Power_Semi. I always wondered why the situation became so urgent over night. This sums that up very nicely.

Obsidience

Very good explanation on the current problem for us non-financial experts. Explains why this is a global problem and not just a US one.

Star and Flag as well.....

Thank you! Finally i can understand why this mess started. However i still do not understand why this bubble was allowed to inflate. I mean surely people in governments who have connections in money sector were aware of this scam and that it will eventually burst. Or - "eat and drink for tomorrow we die" philosophy prevailed?
Until those guys that make the decisions (and big money) will be forced to pay for their dirty tricks - this is bound to happen again.

That's quite a write up there, Power_Semi.

Let us hope that those who perpetrated this financial legerdemain receive their just deserts.

A fantastic clear explanation for people. Thank you!

Great post sir!

Also, don't forget all the money the FED is pumping into the system is created out of thin air, and must be "paid back" eventually, or at least the interest.

That includes the so-called Bailout, which is loaned to the U.S. gov. from the FED, which of course collects interest.

Add into the equation the lowering of the interest rate, and it is clear the PTB or the FED in this case, is perpetuating the problem on purpose, through inflation.

AIG is only a subordinate of the FED, and was only capable of causing this disaster through the FED's backing.

Either way the OP is right; we're in for a lot more than anyone wants to admit in the MSM.

Originally posted by Power_Semi
And that leads me to believe the coming economic contraction will be longer and deeper than most people understand.

That's kinda like saying that the WTC was damaged on 9/11. I see total failure of the global banking system, mass hysteria and panic around the world as people realize they are wiped out, riots, looting, arson, death...

Excellent explanation though.

S'd and F'd my friend. Great post and thanks for taking the time to explain it.

With all the threads going on about October 14th and the Federation of Light and the NWO, it's good to see someone say it like it is. Easy to understand, to the point, and true. Star and Flag, absolutely a great thread!

P.S. Sorry I couldn't add more to it, you pretty much summed up everything in that OP.

reply to post by Power_Semi


That was a good clear explnation, and has helped me understand this mess much better.

Thank you

reply to post by GradyPhilpott

Let us hope that those who perpetrated this financial legerdemain receive their just deserts.

That only happens the day pigs fly over the White House. Meantime we bail them out.





(Awesome OP. I hope it gets a special multiple 'applause' from the mods.)

Finally, a concise explanation!

WOW!!! Amazingly informative! Thank you Power_Semi for pulling back the curtain and allowing us to see what and how this is happening and why the bailout was so important. It still irks me that it all started in fraud, but... Hey, I don't know a person who wouldn't break any law to get more money if they knew they could get away with it!!

I wonder ultimately what would happen if all the banks DID fail. Who would then possess the land and wield authority to foreclose/repossess it?

BTW, we just gave AIG more money - after they had their little half-million dollar vacation:

money.cnn.com...

[edit on 9-10-2008 by an0maly33]

reply to post by an0maly33

I wonder ultimately what would happen if all the banks DID fail. Who would then possess the land and wield authority to foreclose/repossess it?

Just look at who's buying up the banks. Nationalization is a process whereby...

S&F!

Great explanation, thanks for taking the time...

Although, if I may, I have a different spin on what the consequences will be:

Not only, but also because of the shrinkage in faux credit, more, way more people will have to start living within their own means.

So out the window: the reigning standard of living like there's no tomorrow, no environment, petroleum forever, new cars an gizmos every year, the new big house, ecc...

A really needed adjustment in how life should be lived...

reply to post by pause4thought


Indeed, but I was hoping to explore that. Sure the government would take over, but what does that mean?

If the banks were to become government-owned entities, would they continue to evict people from their foreclosed homes? Or would they maybe let them stay there in hopes that they would eventually become productive again? Nothing is gained from an empty plot of land and another family on the street.

Might be time to start looking into starting our own anarcho-syndicalist communes.



[edit on 9-10-2008 by an0maly33]

Indeed, excellent explanation. This is the kind of post that brings credibility to alternative news sources like ATS. You make the Internet proud!

Wow...not being an economist or a financier or even a college graduate, it's hard for me to understand the complex systems involved in this debacle but finally someone explains it in a way that even I now understand for the most part what happened...starred and flagged!