Leverage and its discontents

Epsilon Theory/Discussion between Ben Hunt and Rusty Guinn

Repost from 4-3-2021

“Three blow-ups in three months: Archegos, Greensill, and Melvin Capital. What do they have in common? Insane leverage employed to maximize private gain, provided by lenders that can socialize losses.”

USAGOLD note: So……What else is out there? Hunt and Guinn dig into cause, effect and commonality in the Melvin Capital, Greensill and Archegos blow-ups. When banks like Credit Suisse and Nomura takes losses in the billions on a single failure, questions of systemic risk naturally arise. The notional value of the derivatives market is over $1 quadrillion – all of it leveraged and all of it subject to counterparty risk.

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