Understanding how they do it…

Patrick Byrne:

The End of the World as We Know It

I will begin this preamble to the subject systemic risk with two quotes from Warren Buffett (by quoting him I do not mean to imply his support in these efforts of mine):

• Of excess leverage in the system, Mr. Buffett has said, “No one knows who’s been swimming naked until the tide goes out.”
• Mr. Buffett calls derivatives, “financial weapons of mass destruction.”

I would like to explore the meaning of this in the context of unsettled trades in our nation’s settlement system.

Mark Twain said, “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”

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