The Criminal Banks KNOW Something Is Very Wrong -- Lynette Zang Discussion of pension funds, leverage & interest rates. This is the crux of leverage.
https://market-ticker.org/akcs-www?singlepost=3436868 The reason is simple: If $1 million costs you $100,000 to borrow and keep out for a year at 10% interest when rates fall to 1% you can and will borrow $10 million instead for the same $100,000! This results in a multiplication of leverage by 10 times what it formerly was, and that flows directly into asset prices. The trouble is even a slight increase in interest rates detonates all of this in short order. Tie in all the interest rate derivatives layered on top of this and you have a spectacular event in the making.
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