market-ticker.org / By Karl Denninger / April 3, 2013, 09:14
The screeching coming from CNBS and elsewhere this morning is amusing.
There’s only one chart that matters, and it will, when recognized, blow up the stock market — sending it down 50% or more.
It’s this one:
continue to maintain that we’re in a time very similar to 2007, when
the facts were on the table. Banks paying dividends with money they
didn’t have. Hedge funds that blow. Bubbles in crazy places, then
housing, this time in subprime car lending, student loans and even
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by Louis James, Casey Research:
Doug, there is considerable disagreement over the significance of the
Cyprus crisis. A lot of people are saying that it’s just a flash in the
pan; Cyprus is a small country, far off, and doesn’t really matter.
Other people are saying it’s very significant. The European Central Bank
took unprecedented steps. What do you think?
Doug: I think this could be the spark that ignites
the keg of dynamite under the current financial system. All banks, all
around the world, are bankrupt, and have been for years. That’s because
all the world’s banks run on a fractional reserve basis.
L: I know what you mean, but we should spell that
out: by law and backed with government guarantees, banks only have to
keep a tiny fraction of the money people deposit on hand. They lend out
the vast bulk of it, and in even in good times, they could not return
all depositors’ money at once, since loans cannot be called in
instantaneously, and most would be defaulted on if they were. In bad
times, the charade is even more hollow, since many loans that banks are
currently owed will never ever get paid.
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