Zero Hedge. Excerpts:
Consumer spending is the bedrock of the global economy, and consumer spending depends on expanding debt and leverage. Once that subsystem fails, consumerism and the global economy grind to a halt.
The failure of any critical subsystem in an organism triggers a catastrophic, fatal decline. It doesn't matter if the rest of the critical subsystems are functioning at optimum levels; the failure of even one essential "part" leads to death.
The metaphor is easily extended to machines, where a perfectly sound engine will fail once the oil pump ceases functioning.
The cliche is that a chain is only as strong as its weakest link. The conventional wisdom is that the U.S. economy is so large and diverse that the failure of any one part will have only limited consequences on the economy as a whole.
But this belief was undermined by the financial crisis of 2008, in which the apparently "limited" implosion of subprime mortgage debt dominoed into a full-blown global financial crisis.
..
When financialization fails, the consumerist economy dies. This is what is happening in Greece, and is starting to happen in Spain and Italy.
The central banks and Central States are attempting resuscitation by issuing credit that is freed from the constraints of collateral. The basic idea here is that if credit based on collateral has failed, then let's replace it with credit backed by phantom assets, i.e. illusory collateral.
In essence, the financialization system has shifted to the realm of fantasy, where we (taxpayers, people who took out student loans, homeowners continuing to make payments on underwater mortgages, etc.) are paying very real interest on illusory debt backed by nothing.
Once this flimsy con unravels, the credibility of all institutions that participated in the con will be irrevocably destroyed. This includes the European Central Bank (ECB), the Federal Reserve, the E.U., "too big to fail" banks, and so on down the financialization line of dominoes.
Once credit ceases to expand, asset bubbles pop and consumerism grinds to a halt. And since ever-expanding consumption is the bedrock of the global economy, the global economy will also grind to a halt.
The "flimsy con" is almost fully exposed, and the entire process continues to accelerate.
Consumer spending is the bedrock of the global economy, and consumer spending depends on expanding debt and leverage. Once that subsystem fails, consumerism and the global economy grind to a halt.
The failure of any critical subsystem in an organism triggers a catastrophic, fatal decline. It doesn't matter if the rest of the critical subsystems are functioning at optimum levels; the failure of even one essential "part" leads to death.
The metaphor is easily extended to machines, where a perfectly sound engine will fail once the oil pump ceases functioning.
The cliche is that a chain is only as strong as its weakest link. The conventional wisdom is that the U.S. economy is so large and diverse that the failure of any one part will have only limited consequences on the economy as a whole.
But this belief was undermined by the financial crisis of 2008, in which the apparently "limited" implosion of subprime mortgage debt dominoed into a full-blown global financial crisis.
..
When financialization fails, the consumerist economy dies. This is what is happening in Greece, and is starting to happen in Spain and Italy.
The central banks and Central States are attempting resuscitation by issuing credit that is freed from the constraints of collateral. The basic idea here is that if credit based on collateral has failed, then let's replace it with credit backed by phantom assets, i.e. illusory collateral.
In essence, the financialization system has shifted to the realm of fantasy, where we (taxpayers, people who took out student loans, homeowners continuing to make payments on underwater mortgages, etc.) are paying very real interest on illusory debt backed by nothing.
Once this flimsy con unravels, the credibility of all institutions that participated in the con will be irrevocably destroyed. This includes the European Central Bank (ECB), the Federal Reserve, the E.U., "too big to fail" banks, and so on down the financialization line of dominoes.
Once credit ceases to expand, asset bubbles pop and consumerism grinds to a halt. And since ever-expanding consumption is the bedrock of the global economy, the global economy will also grind to a halt.
The "flimsy con" is almost fully exposed, and the entire process continues to accelerate.
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