enter the new crash word

All those focussed on the sovereign debt default of MF Global and the looming collapses of Jeffries have apparently been missing the point. Reuters have now hypothesised that a previously unrecognised effect of the global London-centric shadow banking system will come into play as defaults occur. Re-hypothecation according to the  Zero Hedge bombshell story is the process where a bank or broker uses client’s collateral to back the bank or brokers own trades and borrowings. It means virtually unlimited leverage via the shadow banking system has been growing over the last three years, in which there are no hard assets backing infinite layers of debt above and it is what really killed MF Global.

According to Zero Hedge those re-hypothecating have been Goldman Sachs $28.17b, Canadian Imperial Bank of Commerce $72b, Royal Bank of Canada re-pledged $53.8b of $126.7b, Oppenheimer Holdings $15.8b, Credit Suisse CHF 332b, Knight Capital Group $1.17b, Interactive Brokers $14.5b, Wells Fargo $19.6b, JPM $546b and Morgan Stanley $410b.

For comparison MF Global had only re-hypothecated $70m. Re-hypothecation may have increased the financial footprints of Eurozone bonds by at least four fold.

What this all means is that the shadow banking system has grown so large $15t in the US for instance that endless bailouts as predicted by the likes of Sinclair and Willie are guaranteed. Trouble, bank runs, gold and silver will surely go hand in hand.