During the most recent famous financial crash of 2008, banks were in the front and center of what went wrong.
According to Investopedia “The 2008 financial crisis began with cheap credit and lax lending standards that fueled a housing bubble. When the bubble burst, the banks were left holding trillions of dollars of worthless investments in subprime mortgages. The Great Recession that followed cost many their jobs, their savings, and their homes.“
The main concern with the situation we are in right now is if or if not banks and creditors have the liquidity to “weather the storm” as broad liquidity continues to tighten as the Fed continues to raise interest rates.
Above is a screen shot from a twitter user sharing some of the biggest banks in the world and how much they hold in derivatives currnenty.
A derivative according to occ.treas.gov is a financial contract whose value is derived from the performance of underlying market factors, such as interest rates, currency exchange rates, and commodity, credit, and equity prices.
Some of these numbers are so large it’s hard to even understand.
The public seems to be finally waking up to how much leverage some of the biggest banks in the world use and the amount is making the retail investors very nervous for what could come next.