TOO BIG TO FAIL? EVERYTHING!

TL;DR

Governments intervene to save corporations deemed "too big to fail" to prevent financial system repercussions.

Transcript

but their fellow investors a concept that nobody talks about today but in 2009 was a very very hot tap topic is too big to fail today I will discuss what is too big to fail how it evolved since 1984 when it started and what is too big to fail now practically everything let's start me to do it 1984 when the seventh bank in the US continental Illinoi... Read More

Key Insights

• 😃 "Too big to fail" originated in 1984 with the rescue of Continental Illinois.
• 🌐 Government interventions to save corporations have increased since the 2009 global financial crises.
• 😃 Central bank liquidity injections have distorted financial markets, making everything "too big to fail."
• 🏦 The top five US banks hold over 45% of all bank assets, making them too big to fail.
• 😃 Central banks' actions aim to prevent market crashes, further reinforcing the "too big to fail" narrative.
• ✋ The European high-yield bond market shows signs of distortion, with junk bonds having yields below 2.5%.
• 😃 Italy's debt situation poses a risk to Europe, as even small countries are considered "too big to fail."

Questions & Answers

Q: What is the origin of the concept of "too big to fail"?

The concept emerged in 1984 when the US government rescued Continental Illinois to prevent financial system instability due to its size.

Q: How has the intervention in saving corporations evolved since 2009?

Since the 2009 financial crisis, governments globally have increasingly intervened to save corporations deemed too big to fail to avoid broader economic repercussions.

Q: Why are banks no longer allowed to fail in the current market?

Central bank liquidity injections have flooded financial markets, making it challenging for banks to fail due to the abundance of funds and low interest rates.

Q: How does the interconnectedness of financial markets contribute to the "too big to fail" phenomenon?

Global pension assets, bond markets, and even junk bonds are interconnected, creating a web where the failure of one element could lead to a chain reaction of financial instability.

Summary & Key Takeaways

• The concept of "too big to fail" originated in 1984 with the rescue of Continental Illinois by the Federal Deposit Insurance Corporation.

• Interventions to save corporations considered too big to fail have increased since 2009 global financial crises.

• Banks, pension assets, and bond markets are interconnected and supported by central bank liquidity, making everything "too big to fail."