Nice writeup. A good popular discussion of leverage is in the movie Margin Call, regading the 2008 meltdown:
> "Well, as you probably know, over the last 36 to 40 months, the firm has begun packaging new mortgage-backed security products that combine several different tranches of rating classification in one tradeable security. This has been enormously profitable... Well, the firm is currently doing a considerable amount of this business every day. Now the problem, which is I guess why we are here tonight, is that it takes us, the firm, about a month to layer these products correctly, thereby posing a challenge from a risk management standpoint... Well, we have to hold these assets on our books longer than we might ideally like to. But the key factor here is, these are essentially just mortgages, so that has allowed us to push the leverage considerably beyond what you might be willing or allowed to do, in any other circumstance, thereby pushing the risk profile without raising any red flags."
Running the money printing press was the government response to that situation, i.e. 'deleveraging the bank holding companies (BHCs) via quantitative easing' - which does illustrate how a government controlled by financial oligarchs operates in practice. The actual homeowners could have been the recipients of the bailouts - i.e. the government would have taken over their loans, provided a zero-interest period, converted the loans from adjustable to fixed-rate, sold them back to the banks (or just set up a separate institution), and then the homeowners could have stayed in their homes and continued to pay off their mortgages at an acceptable monthly rate - or some combination of the above. The BHCs would have suffered much more significant losses under that scenario, and perhaps more would have gone the way of Bear Stearns and Countrywide.
Notably, this illustrates that regardless of whether monetary policy is tight or loose, the government's fiscal policy can be engineered to support the financial oligarchs. For example, today's high interest rates are going to be used to justify government fiscal policies that benefit the oligarch class (i.e. pushing for mass unemployment to bring down wages to 'fight inflation', etc.). Similarly, large banks are not being forced to raise personal savings interest rates as the Fed rate rises (as that would benefit ordinary people, even if inflation is outpacing interest rates).
As far as cryptocurrencies, it seems fairly unlikely that crypto funds will be the beneficiaries of quantitive easing or other government largesse, as crypto hasn't yet bought enough corrupt politicians.
> "Well, as you probably know, over the last 36 to 40 months, the firm has begun packaging new mortgage-backed security products that combine several different tranches of rating classification in one tradeable security. This has been enormously profitable... Well, the firm is currently doing a considerable amount of this business every day. Now the problem, which is I guess why we are here tonight, is that it takes us, the firm, about a month to layer these products correctly, thereby posing a challenge from a risk management standpoint... Well, we have to hold these assets on our books longer than we might ideally like to. But the key factor here is, these are essentially just mortgages, so that has allowed us to push the leverage considerably beyond what you might be willing or allowed to do, in any other circumstance, thereby pushing the risk profile without raising any red flags."
Running the money printing press was the government response to that situation, i.e. 'deleveraging the bank holding companies (BHCs) via quantitative easing' - which does illustrate how a government controlled by financial oligarchs operates in practice. The actual homeowners could have been the recipients of the bailouts - i.e. the government would have taken over their loans, provided a zero-interest period, converted the loans from adjustable to fixed-rate, sold them back to the banks (or just set up a separate institution), and then the homeowners could have stayed in their homes and continued to pay off their mortgages at an acceptable monthly rate - or some combination of the above. The BHCs would have suffered much more significant losses under that scenario, and perhaps more would have gone the way of Bear Stearns and Countrywide.
Notably, this illustrates that regardless of whether monetary policy is tight or loose, the government's fiscal policy can be engineered to support the financial oligarchs. For example, today's high interest rates are going to be used to justify government fiscal policies that benefit the oligarch class (i.e. pushing for mass unemployment to bring down wages to 'fight inflation', etc.). Similarly, large banks are not being forced to raise personal savings interest rates as the Fed rate rises (as that would benefit ordinary people, even if inflation is outpacing interest rates).
https://thehill.com/policy/3656474-lawmakers-slam-big-bank-c...
As far as cryptocurrencies, it seems fairly unlikely that crypto funds will be the beneficiaries of quantitive easing or other government largesse, as crypto hasn't yet bought enough corrupt politicians.