a less than virtuous cycle.
the system leverage has been borrow in yen and buy, well, anything at a greater than 20 x margin. yen lower, fx higher, risk assets (equity and equity linked derivatives higher).
notional derivatives increased from $400 trillion to $750 trillion being held in various and sundry arms length, stand alone, and special purpose vehicles
a 1% error in mark to model accounting is roughly 15% of global gdp and 35 times the $200 billion in "real" capital on the Fed balance sheet's thumb in the dike
presumably the default swap issuer (and lender) of last resort is not Boris in Bermuda but that is for the Bank of International Settlements to opine
when high tide leaves the shores and the yen returns home ?
the system leverage has been borrow in yen and buy, well, anything at a greater than 20 x margin. yen lower, fx higher, risk assets (equity and equity linked derivatives higher).
notional derivatives increased from $400 trillion to $750 trillion being held in various and sundry arms length, stand alone, and special purpose vehicles
a 1% error in mark to model accounting is roughly 15% of global gdp and 35 times the $200 billion in "real" capital on the Fed balance sheet's thumb in the dike
presumably the default swap issuer (and lender) of last resort is not Boris in Bermuda but that is for the Bank of International Settlements to opine
when high tide leaves the shores and the yen returns home ?
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