“Unrecognizable” is the perfect term. Based on the sentiment by most of my friends and co-workers, I’ll go out on a limb and say that most people think this is just a normal downturn and normal economic cycle. People do feel it will be worse than the last few recessions, but they are mainly clueless about the scale and scope of the coming contraction or its underlying cause.
So, how would you describe the coming scale and scope?
Duh — brain fart. I meant to say “raising reserve requirements by 8 to 12% removes a big chunk of credit from the lending system with a snap of the fingers.”
I was thinking of another example and just slapped in the numbers without changing the rest of the example.
A good example of the opposite, where the excess liquidity came from is in the increased leverage allowed to the i-banks, by allowing them to go from leverage of 12 or 15:1 to 40:1 — there’s a huge increase in the amount of money seeking a borrower as a result. Same sort of idea, only in reverse. Think of reserve requirements as the inverse of leverage.
Most people are oblivious to everything that isn't directly affecting their personal lives at this moment, or that isn't blasted 24/7 across their favorite entertainment channels.
The bridge to the 21st century got dismantled and sold off in pieces. The train already went over the cliff and is on the way to the bottom. Most people think the ride is going just fine, so far. Their car hasn't reached the bottom yet.