This is what I was talking about
Systemic Risk: Are Some Institutions Too Big to Fail a
The important point is from 2000 to 2007 about $14 trillion of securitized debt was created and sold, about half of that was sold to foreigners. By contrast, $4.5 trillion of Treasuries were sold (40% to foreigners). The securitization pipeline to the debt used to lubricate the US economy AND to foreign exchange to help finance the endemic current account deficit, is now blocked. It is highly unlikely that it can be substituted by selling Treasuries.
If either securitization is not fixed or an alternative is not found, some hard "readjustments" may be in store, Armageddon Part Two perhaps?
According to The Economist, currently approximately $8.7 trillion of assets are financed worldwide by securitisation; they didn't say how much of that is in Europe or USA or whether that is face value or mark-to-market.
This is what I was talking about
The world of finance is a multidimensional system. In most dimensions, it works like the bread market, i.e. with negative feedback mechanisms. But in two important dimensions it does not. Market forces do not stabilise:
Both are unstable and subject to positive feedback processes. Movements of the price level – inflations or deflations – tend to be self-reinforcing. So do movements in leverage.
Two consequences follow.