Shadow Banking.
The dog that has not barked.
There were a number of “network connectivity issues” this morning, limiting access to the internet, causing delays in the gathering of items for News Items. As a result, this morning’s edition is late.
That said, before the “network connectivity issues” arose, I distributed a special edition of News Items, concerning yesterday’s elections. That was delivered to your in-box at around 3am Eastern Time.
Shadow banking is the dog that has not barked during the latest global spasm of financial stress. This is very fortunate, especially for small countries such as Ireland that have bet the farm on this industry.
If that vast nexus of international contracts and opaque leverage starts to unravel, there are no obvious circuit breakers to stop a dangerous chain reaction.
These shadow entities borrow short in fickle capital markets to lend long, or to buy illiquid securities, or to invest in real estate. They do so on a galactic scale with endemic mismatches of maturity. By definition, this is mostly beyond the oversight of regulators.
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