We’ve Entered A Rehypothecation DOOM LOOP

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Cameron Long

Cameron Long

Cameron is a seasoned CFO and CPA with 31 years in finance. He created the AI Trader's Playbook to help everyday investors use AI to find high-confidence trades — in minutes, not hours.

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33 Comments

    1. George is great. Natural teacher. He has so much fun doing this it makes it fun and easy for his audience to understand. Plus.. Hi Josh

  1. Unbelievable the debt webs that have been created. When this debt market explodes , it’s going to be hideous

  2. Nice Bob Ross reference! But is that house a happy house? I didn’t see any happy trees there. Make sure you draw only happy houses!

  3. We’re in a pretty weird state of affairs where, if the US govt was to balance its budget tomorrow and stop issuing new debt, so that all treasury issue was only rollover of existing ones, the world financial system would collapse unless rehypothecation was ramped up to x1000. The world is addicted to the US’s debt addiction, like a co-dependent couple. An addiction doom loop!

    1. Fiat systems require exponential increases in debt to be issued, pulling money from the future into the now. The moment that growth slows you almost immediately get a deflation doom loop which causes cascading liquidations, lowering of asset prices, and monetary collapse with no tools that work. Its an economic calculation problem, and the models used to make decisions are equilibrium based when in fact the processes involved as stochastic.

  4. The big picture of the demand for collateral becomes even more scary when you learn that pretty much every country on the face of the earth has had their laws changed to allow your assets to be sucked up as collateral all the way up the chain. Has George ever talked about The Great Taking by David Rogers Webb?

  5. As usual, revealing the hidden ‘”truth” of the banking system. Well beyond the FED’s control because it is a systemic flaw, 1000X worst than Lahman episode.

  6. Thank you, George! I’ve long thought the same thing about the dangers of hypothecation and the explosion of derivatives, which are all forms of, you got it, financial leverage, and they are all often used to support each other. All this atop a mountain of traditional debt at all levels. What possibly could go wrong?

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