Oh what a tangled web we weave, when first we practice to deceive. - Sir Walter Scott
Remember those banks and other financial institutions that were ‘too big to fail’? Well, the IMF has confirmed that the world of global finance still has such enterprises so that if one goes down, it has the tendency to pull others down, resulting in worldwide chaos. In the past – recall 2008 – governments put billions of taxpayer monies into such banks to keep them solvent as they started to be stiffed on the loans and other risky commitments that they had made.
Regardless of all the happy dancing in the Rose Garden about increased employment and improving economy, what’s really happening is that the global economy, including America’s, is in a mess. As a result, governments all over are worried sick about the size of future bailouts which promise to be huge compared to the amounts paid out a few years back. Their reaction to this really tells the true tale of what is going on in the world’s fisc, and it ain’t pretty. Catastrophe looms.
In response, the mavens at IMF have come up with a couple of ‘improvements’ to make things better in the future. But don’t hold your breath about anything becoming better for you. First, institutions too big to fail will no longer be labeled so obviously. Instead, they will be called Systemically Important Financial Institutions, or SIFIs for short. All that means is that each SIFI finds itself in a row of dominoes made up of other SIFIs and lesser banks, so that no SIFI is going to go down alone.