Comments by "Frederick Miles" (@frederickmiles8815) on "Collateral Is The Most Misunderstood Yet Crucially Important Part Of The Monetary System" video.

  1. Correct - excellent analysis - there is alot of fugazzi collateral, i always viewed it as derivatives of the Feds repo markets (minus the security one gets in a closed bank reserves closed economic model). And what is scarier is the swaps used as insurance (look into perpetual, bullet, and some of the super dirty swap instruments - especially when you realize the connectivity to retail products like same equities, investing, etc). So many large players are not writing down losses (especially OTC) and so much paper is backed by nothing - not just junk masked at pristine - and the swaps at this point could never ever be paid out.
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  2. Also - the part he misses is the moral hazard, the blindspot is not benign as it is key driver for liquidity for many domestic players using offshore llc's in various markets. Digital architecture and algo's are often designed to take advantage of regulatory blind spots (regulatory arbitrage).
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