The "off-balance-sheet" dodge has been around forever in one form or another, with "social security" -- an off-balance-sheet item for decades, since the time the Regress started raiding its funds -- being likely one of the largest (although, given the rate at which dodgy derivatives are being created these days, perhaps not).
No one I know puts much credence in ZH's constant doom-gloom-death-destruction drumbeat as a rule, but here they (he? it?) do have a point. The daisy chain of re-hypothecation is nowadays enormous beyond comprehension by mere mortals, and it is utterly unsound. The slightest touch can, in a very literal sense, bring the whole structure down.
That said, it is in no one's interest TO bring the structure down (well, barring assorted jackoffs like Zerobama and his cronies), and therefore the structure has a considerable chance of survival. The trick here is to delever/unwind a large portion of the gigantic amount of rehypo'ed "assets" w/o triggering a stampede for the exit doors.
However, THAT said, I'm not at all confident that the current bankster class have enough talent to implement this remedy. Stay hedged; diversify some assets out of USD into NEK, SGD, ZAR and CHF, spread your brokerage and bank accounts around, put on some number of short positions, particularly in overextended or dodgy garbage like NFLX, on rallies.
Also, as a side note, have you realised that the MF Global affair, and especially the behaviour of this crooked bankruptcy trustee, are INflationary events? Yes, indeed. By dint of having their funds frozen or otherwise unavailable, NUMEROUS farmers are unable right now to buy seed for next year's crop. If this situation persists (and when have you EVER seen someone hurry up when he is billing $891/hour?), then expect planting next spring to take a sizable hit, good weather or not, and expect harvests to be correspondingly smaller. And which direction do you expect grain (and thus livestock) prices to go as a result of smaller harvests, hmmm?
Are we having fun yet?
I am *very* P.O.'d at the "outsourcing" craze, as it resulted in my having to leave a company which stood to make a mint off of this: and which said outsourcing occurred before my matching funds (paid in company stock) vested.
Phooey and Double Phooey!