Janet Tavakoli was a recent guest on “On the Edge with Max Keiser” and had some troubling things to say about the state of the present U.S. financial system.
She believes the liquidity pumped into the system will not be sufficient to reflate the economy because of over-leveraged U.S. households. The real burden of debt is already increasing as nominal GDP contracts. This means the system is now more fragile than ever.
Meanwhile, banks have been recapitalized in an effort to save the system when mechanisms to organize a bankruptcy resolution process for too big to fail institutions would be much less costly for the economy. This is a topic I covered in a recent post.
Steve Keen told Max that the only way out of this is a debt jubilee – a notion I believe is a political non-starter. So expect this to end in a debt deflationary scenario as the Fed and other central banks are not yet getting any traction except in asset prices.
Below is the video of Max Keiser talking to Tavakoli by phone. Tavakoli provides some enlightening words about fraud, derivatives, and broker-dealer bankruptcy. The video runs about 10 minutes.