via Instapundit
We now know that this has been happening in China with the most critical component of its economic growth miracle: steel. We will soon discover that all other assets: stocks, bonds, commodities (including gold and silver) and finally cash (think deposits) have been comparably rehypothecated and criminally commingled. The end result will be the most epic bank run in world history, which incidentally is precisely what the central banks are attempting desperately to delay as much as possible by generating excess inflation to "inflate" away the debt, leading to rematching of finite assets and virtually infinite liabilities. Alas, in a world in which credit-money liabilities are in the quadrillions, and in which the real assets are in the tens of trillions, only hyperinflation can seal the deal.
The Fed recently announced another round of QE. Could this be the reason? In order to inflate away massive debts which isn't backed by nearly enough collateral?
This reminds me of the MF Global mess. There is no integrity in the financial system. Because of that, the system is a house of cards. Integrity is an absolute necessity in a leveraged financial system.
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