True Size of the Shadow Banking System Revealed (Spoiler: Humongous) 387
KentuckyFC writes "The banking system is closely regulated and monitored by central banks and other government agencies. But it has become common practice for banks to get around this by doing business in ways that don't show up on conventional balance sheets. This so-called shadow banking system is thought to be huge, but nobody knows exactly how big. Now three econophysicists have discovered that the size distribution of the world's largest financial firms significantly differs from the size distribution of smaller ones or indeed non-financial firms. And they hypothesize that the difference is the result of the hidden transactions that make up the shadow banking system. By this new measure, the shadow banking system has grown dramatically since the financial crisis and was worth over $100 trillion in 2012, significantly more than had been thought and more even than the GDP of the entire planet. Nothing to worry about, then."
Comment removed (Score:4, Informative)
Re:BWAHAHAHAHAHAHA (Score:5, Informative)
Then the feds decided this was bad and that they should fine them an extra $800 million.
WTF? Your own article says they were fined for hiding the loses. There are even criminal charges. It's legal to lose money, but it isn't legal to lie about it to regulators.
Re:BWAHAHAHAHAHAHA (Score:5, Informative)
Peanuts (Score:4, Informative)
Re:The economy is faith based (Score:4, Informative)
I think saying fiat based currency is faith-based economy in literally true. It relies on everyone agreeing that its worth something.
Not really, when a government issues it and makes it the legal tender.
The value of the USD is based on the USG's willingness to bash peoples' heads in to collect taxes. FRN's have been threat-promises since 1971.
That and its legacy function as the petrodollar under the long-obsolete Bretton Woods terms. Syria and Iran are the last remaining threats to its dominance there, though Russia and China are doing what they can to level the playing field.
Re:What is an "econophysicist" (Score:3, Informative)
It's a term that attempts to distinguish between economists who study monetary fictions and those who study reality based on measurement of resources.
Traditional economists of all schools practice "econo-fantasy" and almost universally support the making of money out of money. This is why current-day monetarism bears no relationship to the physical resources of the planet, and why financial institutions continue to profit despite the planet being in a death spiral.
Lacking even a vestigial brain cell, the practitioners of econo-fantasy don't recognize any such distinction of course.
Re:Because of FED (Score:4, Informative)
Well, since they're not lending it, small businesses can't get loans to expand and thereby hire more people to reduce unemployment and prospective home buyers can't get financed and thereby can't help the housing recovery.
Instead, the banks get loans from the Fed at .25%, then buy treasury notes. Right now a 2 year treasury note is only like .5%, but in recent years they've been upwards of 1%. Inflation doesn't matter when it's all risk-free interest profits off somebody else's money.
Since the taxes to pay off those notes come from income earning Americans, it's basically a perpetual motion slavery machine.
1) Fed loans to banks.
2) Banks ignore individuals and loan to government.
3) Government taxes labor to repay banks.
4) Banks repay Fed.
5) Profit!
6) Goto 1
It's just a straight-up evil system to enrich the banking cartel off the backs of workers.
Re:BWAHAHAHAHAHAHA (Score:5, Informative)
One thing it does is to block lenders of record (banks) from considering certain data like race
Sorry... if you're actually advocating loan decisions based on race, you belong in a different era. Going on to say "what it actually does" :
As a result banks cant price the risk for tons of very poor people that need loans
Most very poor people all loans are very very bad for. It is very, very rare that any loans are ever good for poor people. Banks gouge the poor more than their better off customers, and payday loans at 300% often end up cheaper than bank overdraft and late payment fees. Claiming banks would be the saviour of the poor, except for those darn regulations is not just disingenuous, it's close to trolling.