Shadow Banks

Shadow banks are financial intermediaries that conduct maturity, credit, and liquidity transformation without access to central bank liquidity or public sector credit guarantees. Examples of shadow banks include finance companies, asset-backed commercial paper (ABCP) conduits, limited-purpose finance companies, structured investment vehicles, credit hedge funds, money market mutual funds, securities lenders, and government-sponsored enterprises.

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Unforgiving Debt

Countries faced with uncomfortably high debt ratios have several options available to them. Monetisation, prolonged austerity and debt default clearly have lots of problems attached. Selling the family silver through privatisations is popular but its inherent unsustainability hardly commends it as a way of life. Cheating, by reclassifications of what is private rather than public debt, is also popular but you usually get found out – destroying any credibility benefits. Fiddling the books is more likely to raise risk premia than reduce them. Pleading for debt relief might work but Greece’s targeted, asset-windfall approach has to win plaudits for irony…
Greece Wants Germany to Pay War Reparations, Wall St Journal, 24 Apr 2013

Cyprus Bank Crisis: Selective Timeline

“For instance, on the planet Earth, man had always assumed that he was more intelligent than dolphins because he had achieved so much — the wheel, New York, wars and so on — whilst all the dolphins had ever done was muck about in the water having a good time. But conversely, the dolphins had always believed that they were far more intelligent than man — for precisely the same reasons.” Douglas Adams, The Hitchhiker’s Guide to the Galaxy

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