The Subprime Crisis is Just Starting

Should stagflation slam into an overpriced housing market after investor safety layers have already been stripped away, then we haven’t even begun to see the full extent of the damage to investors, to the housing market, and to the financial system as a whole.

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If real subprime losses climb by 6 times or 12 times – then system wide financial losses likely climb by 24 times, or 36 times, or more. Because everything is linked, and the math that links all the dominos is multiplication, not addition. If you want a mental picture of how banking dominos work, don’t think of one domino hitting another domino, hitting another domino in a long line. Rather, think of one domino hitting two dominos, hitting four dominos, and so forth. Understand this, and you will understand the desperation in the current moves by the Federal Reserve.