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(The Year 2012 In Review)
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|User Info||Making Sure "It" Never Happens Again; entered at 2009-05-19 13:17:37|
If on the macro perspective everyone is dumping assets like say last fall, then wouldn't the asset prices fall so fast if everyone is selling, so many persons would be unable to meet collateral requirements even if they sold the assets (because of a sort of market crash), and then there would be more insolvent banks because the assets they sold are not enough collateral, and then the bank's insolvency would destroy other asset values making more loans that are associated with the bank under-collateralized?
Its called price discovery and there's a bid under every asset - all we argue about is WHERE.
And by the way, if you get blown out (and out of business) as a consequence of pushing the envelope too hard, and thus the liquidation event nails you (but protects the depositor) exactly how is this BAD? It is in fact GOOD, as the only people who lost were those who made the risky bets, there was no systemic impact, others will step in to take your place in the capitalist system AND your explosion serves as a powerful lesson to others to "don't do that stupid ****."