Comments by "Curious Crow" (@CuriousCrow-mp4cx) on "What Are Shadow Banks and How Do They Silently Control the World?" video.

  1. Well it seems that's only true for Bank Credit, which is not to deny its critical importance. But, as Jeff states, the Shadow Banks lend to regulated banks, who then either lend it onwards, or engage in trades, like the Carry Trade, but it's a opaque process, which amplifies the danger involved to the global financial system. As is, collateral and dollar shortages are endemic, so this in turn raises the risk of a systemic failure. The Money Markets are unregulated lenders, and so the risk cannot be quantified by regulators. The regulated banks have been reined in so far, but to date the NBFIs remain free of capital requirements or insurance to cover potential losses. This is why the Yen Carry Trade unwinding sent tremors through the bond market last year. And Repo failures have been increasing in Q3 and Q4 in 2024. No-one knows where or when this UXB will blow. And that would probably finish the current iteration of the global intermediation network, which was patched up but not fixed in 2008. For regulators, the complete repair is regulation of the Non-Bank Financial Institutions like Money Markets. And that might not happen in the current context.
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  2. But until 2008, the Eurocurrency System Banks, in conjunction with the Shadow Non Bank Financial Institutions were completely unregulated. So, as Jeff said, the Shadow Banks are still unregulated. The Basel III regs have taken so long to be drawn up and actually implemented because Shadow Banking wasn't well understood by regulators until they did the post mortem on 2008. Until they have berm implemented, the risk is still present as collateral and USD shortages are endemic to the global financial system.
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