While the banking system is now strong, new risks have emerged and"the resilience of the global financial system has not yet been proven," the IMF said.
Just as our modern banking system couldn't function without the means to record the exchanges of fiat currency between individuals, so too could a digital network not function without the trust that comes from the ability to accurately record the exchange of digital currency between parties.
Leon Black, billionaire investor and founding partner of hedge fund Apollo Advisors, said the banking system has been"broken" since last summer and has fostered a credit crisis"the likes of which I have never seen in the 30 years I have been in the business.".
Equally as our modern banking system could not work without the means to videotape the exchanges of fiat money in between individuals, so also might an electronic network not work without the trust that comes from the ability to properly record the exchange of digital currency in between events.
Just as our modern financial system could not work without the methods to tape the exchanges of fiat currency in between people, so too could a digital network not operate without the count on that comes from the capability to properly tape-record the exchange of electronic money in between celebrations.
As Gary Gorton and Andrew Metrick of Yale have shown, by 2007 the United States banking system had become crucially dependent on"repo" transactions, in which financial institutions sell assets to investors while promising to buy them back after a short period- often a single day.
One way to summarize his argument is to say that slow-motion bank runs are already in progress in the European periphery, and that these countries' banking systems are being sustained only by a process in which, say, Ireland's central bank borrows from the Bundesbank and then lends the funds on to Irish private banks to replace the fleeing deposits.
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