The current landscape of the global economy is full of uncertainty and potential danger. The article in question claims that half of America’s banks are already insolvent and warns of a looming credit crunch that could trigger a global financial crisis. It points to data from the Federal Deposit Insurance Corporation (FDIC) which shows that more than 5,000 banks have negative tangible equity - meaning their liabilities exceed their assets.
This is an alarming situation, and it has been made worse by the Federal Reserve’s attempts to keep these banks afloat with cheap funding and accounting tricks which allow them to overstate their assets while understating losses on loans. As the Fed begins tapering its bond-buying program and interest rates start to rise, these fragile banks will be exposed, leading to cuts in lending or fire-sale prices for assets.
The article also emphasizes how interconnected US banks are, making it easy for one failure to cause a domino effect which would create systemic risk for the whole economy - similar to what happened during the subprime mortgage crisis of 2008. This makes it even more important that regulators are prepared for any kind of banking collapse.
When looking at this situation it appears as though there really isn’t much choice; either continue fighting inflation or let a banking crisis happen? The former option will only delay inflation as opposed to preventing it altogether while putting pressure on the US Dollar itself; whereas allowing a financial crisis would result in big banks becoming bigger while at the same time screwing over average people who get left holding all sorts of bills courtesy of government bailouts (which fuck taxpayers directly).
It’s no surprise then why many Canadians are now foregoing meals just so they can buy homes with fake dens priced 150K-200K over asking price - just think about what happens once OSFI says those 30 year mortgages aren’t valid anymore? What happens when one small bank fails? What about when a big bank truly fails? Who ends up being left holding all this debt when costs get passed onto customers and taxpayers via roundabout means?
Unlike 2008 there don’t appear to be any tools available which can prevent this from happening without causing damage elsewhere - leaving little choice but prepare ourselves economically as much as possible by cutting unnecessary expenses like Disney Plus subscriptions or feeding our kids something other than Avocado Toast! We may also need some new strategies such as getting creative with how we house ourselves such as rooming together or even couchsurfing like Minister Lisa MacLeod did recently!
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Author Eliza Ng