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22 November 2008 @ 12:39 pm
vignettes from the great collapse  
So, wondering what explosions are coming down the road next? Well, in the US there's the commercial real estate collapse, the Option Arm resets, and the bankruptcy of various local governments and state fiscal crises. But internationally, we have even more fun! After the collapse of Iceland, caused by banks that were vastly outsized compared to the countries responsible for them, I briefly thought of Switzerland, another small country with a large banking system. But I dismissed it, because surely Swiss bankers wouldn't have been as foolish as the bubbly Iceland banks.

As it turns out... not so much. Credit Suisse? Leveraged 40 times. UBS? 64 times. And their balance sheets? Perhaps ten times Switzerland's GDP. Iceland's bank liabilities were only 8.5 times GDP when they collapsed and essentially took down Iceland's economy along with. And like Iceland, Switzerland is not in the EU or the eurozone, and has no access to their larger protections.

One of the things you learn if you actually read Capital is that Marx was in fact a keen analyst; watching him pick apart the structure of nascent industrial capitalism is a great pleasure. And one of his conclusions was that capitalism will invariably destroy itself. His predictions on what would come next, maybe not so much, but on this at least Marx was right.