northman on Nostr: In today's Western hyper-financialized economies, most of the money in circulation is ...
In today's Western hyper-financialized economies, most of the money in circulation is created by commercial banks through loans.
These loans are usually secured by the borrower posting assets to the lender as collateral, but these assets are often re-hypocathated, i.e. re-posted by the previous lender to another lender as collateral for his/her own borrowing. In normal times, this increases liquidity and dissipates risk through the system.
However, in times of stress, an inability to recover the value of the asset can cause a local crisis to spread along the collateral chain to the entire World in unpredictable ways.
This may be the situation in which we now find ourselves.
These loans are usually secured by the borrower posting assets to the lender as collateral, but these assets are often re-hypocathated, i.e. re-posted by the previous lender to another lender as collateral for his/her own borrowing. In normal times, this increases liquidity and dissipates risk through the system.
However, in times of stress, an inability to recover the value of the asset can cause a local crisis to spread along the collateral chain to the entire World in unpredictable ways.
This may be the situation in which we now find ourselves.