The Phaserl


Is Leverage In Gold And Repo Markets Reaching Its Limits?

By Taki T., Gold Silver Worlds:

It’s ironic, or it seems that way to us, that two of the least understood financial markets by equity investors are two of the most systemically important – repos and gold. Even more ironic is how so many investors don’t even consider them to be all that important.

First, what is repo and why does it matter? In our own search, we came across, an excellent website explaining the concept of repo in great detail. The author writes that the repo market was one of the key reasons of the 2008 crash. What’s more, it appears that repo is the most underexposed driver of the financial crash. And here is the worst news: the repo market has not been fixed since then.

It turns out that one-fourth of the mortgages supposedly sold to investors were actually held by the bankers. Those bankers often used the mortgages as collateral to get overnight loans from each other and from other financial institutions. This kind of borrowing has a name.

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