It’s One Big (bailout) Club, and You’re Not In It

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1 year ago
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Imagine for a moment you are in incredible debt. You have racked up your credit cards to their maximum limit. You bought a few cars with loans that you could not afford. You bought one or two houses with a mortgage you cannot afford. And you also have a brokerage account full of assets. But you leveraged that, too.

You used your margin all the way up to your limit. And now those stocks that you bought have started to collapse in price. You have leveraged yourself up to the eyeballs. And if you were to sell everything you own right now, you would still owe money negative net worth. If you were in that situation right now, you would get a margin called by your broker.

You would have to start liquidating things. You would be forced into liquidation and bankruptcy. And then you would have to start over very slowly, rebuild yourself from square one. Obviously, the situation would be no fun. And people have found themselves in this situation before, but they would be forced into starting over and starting over. They would nobody would be coming to their rescue.

Timecodes
0:00 The Harsh Reality of Over-Leveraging
1:08 How Central Banks and G-SIBs are Treated Differently
2:03 The Mad Scramble for Dollars
3:05 Federal Reserve's Opaque Balance Sheet
3:49 Using Options to Offset Costs
4:40 Breaking Down the Federal Reserve's Balance Sheet

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#GSIB #FederalReserve #CentralBanks #Bailouts

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