The $3 Trillion Debt Bubble: An Introduction to Shadow Banking


This is the story of a trillion dollar debt bubble. It explains how and why it came into existence, what caused its creation and expansion, and how and why it is likely to burst.In the first chapter we will see that the world’s first central bank was the Bank of England. Its function was to create money by lending it into circulation. 

 Most people don’t know what a shadow banking system is. It is a collection of unregulated financial institutions and financial products that serve as intermediaries between depositors and borrowers. A shadow banking system exists only because central banks are in control of interest rates and the supply of money.

These systems play an important role in financial crises, such as the Great Depression and the Global Financial Crisis of 2008-2009. They are especially prevalent in countries like the U.S., which have low interest rates. The government can always print money at will. This means that it can create money to fund deficit spending. But if they try to reduce the money supply, there will be inflation.

Because the amount of money and credit in the economy will increase and there will be more interest in loans than cash to pay for them. A lot of people don’t understand what shadow banking is. They think that it is a type of bank or financial institution that is not supervised by government. This is not true.

Shadow banking has a very different purpose from traditional banks. Traditional banks create money when they lend it out, while shadow banking creates money by selling loans to investors. The United States Federal Reserve System was established in the year 1913. It was created to provide banking services to the country’s local banks.

The money that these local banks had issued was deposited into the banks’ reserve account with the Fed. This money was used to back loans to the public. By creating credit money and then lending it into circulation, the Fed was able to expand the money supply. The creation of this money was called the Federal Open Market Committee (FOMC) buying of Government securities.

These securities are usually referred to as government bonds or U.S. Treasury notes. The FED kept the interest rates very low until the beginning of World War I. Between the years 1914 and 1920 the total amount of money that the Fed created increased from less than $600 million dollars per year to over $50 billion dollars per year.

During the period between the World Wars, the Fed expanded rapidly due to the government’s large deficits, rising consumer spending, growing investments, and the growing business cycle. From 1932 to 1936, the FED printed approximately $34 billion of money. The FED printed about $37 billion during the years 1939-1942.

Q: What is Shadow Banking?

A: Shadow banking is an unregulated, multi-trillion dollar market of lending that operates outside traditional financial institutions. Shadow banking is the most powerful force behind the 2008 financial crisis. Its impact is still being felt today as we see the collapse of the global economy.

Q: How did Shadow Banking start?

A: For years, private equity, hedge funds, and other shadow bankers would borrow money from commercial banks. They were doing this through a process called repo, where they would lend out cash and borrow cash back later, and sell those borrowed dollars on the open market. When the market crashed in 2008, these shadow bankers had billions of dollars of debt. This created a domino effect and forced commercial banks to bail out these firms.

Q: Why is this important?

A: Since 2008, the amount of money available to the U.S. economy has been halved.

Q: How did you decide to write a book about shadow banking?

A: After writing a blog for five years, it seemed like there was no real way to connect what I was learning in the classroom to my day-to-day life. I thought that by making people aware of the issues around shadow banking, I would be helping change the system. By giving people a chance to learn more about it, they could start thinking about solutions.

Q: Why should we all read this book?

A: This is an introduction to shadow banking. We need to understand what it is, who is affected by it, why it is important, and what we can do about it.

Some Points:

– The US government has accumulated a total debt of $14 trillion since the Great Recession.

– $9 trillion is due within the next 3 years.

– $3 trillion was created by the Federal Reserve through ‘quantitative easing’.

– $4 trillion was borrowed from foreign governments and organizations.

– $1.5 trillion was borrowed from Wall Street via the Troubled Asset Relief Program (TARP).

– $1.2 trillion was borrowed from other financial institutions.

– $500 billion was borrowed from the Federal Home Loan Bank.

– $440 billion was borrowed from the Export–Import Bank.

–  It is estimated that one third of this money is being created by shadow banks who are not subject to the same regulation or reporting requirements as normal banks. These shadow banks include hedge funds, insurance companies, and other entities.

– The total global debt of all the banks, money market funds, insurers, pension funds, hedge funds, and sovereign wealth funds is now more than $80 trillion.

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1. A large part of the U.S. debt crisis has been caused by the Fed printing $3 trillion out of thin air and creating more than $6 trillion in new money.

2. This unprecedented creation of money out of thin air has led to the rise of “shadow banking” assets, which are not controlled by traditional banks and have allowed households to become extremely leveraged.

3. The result has been a housing bubble and the largest financial bubble in world history.

4. We have a financial bubble so large that it could destroy our entire global financial system.

5. “Shadow banking” is when traditional banking is out in front of us. We know that money is created by central banks out of thin air and loaned to banks who do the same for us. We know that these institutions are then loaned back into the real world of companies and individuals as credit. In our present system, these companies and people pay it back with interest. However, not all debts go back into the system.

6. There are more companies operating outside the mainstream economy than ever before. They exist on the fringe and can get away with whatever they do. In some cases, they are banks themselves.

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