President Barack Obama said he believes the global financial system remains at risk of implosion with the failure of Citigroup or AIG, which could touch off “an even more destructive recession and potentially depression.”
His remarks came in a“60 Minutes” interview in which he was pressed by Steve Kroft for laughing and chuckling several times while discussing the perilous state of the world’s economy.
“You're sitting here. And you're— you are laughing. You are laughing about some of these problems. Are people going to look at this and say, ‘I mean, he's sitting there just making jokes about money—’ How do you deal with— I mean: explain. . .” Kroft asked at one point.
“Are you punch-drunk?” Kroft said.
“No, no. There's gotta be a little gallows humor to get you through the day,” Obama said, with a laugh.
But is the problem as real as Obama stated? Nobody knows. The problem is whether a domino effect exists: Will, when one bank topples over, the rest fall? It might happen, and may even be worse in Europe than in the US since leverage in Europe runs at 1:50 and in the US at 1:12.
A solution, which only fixes a tiny part of the problem, might be to 'unwind the stack,' resolve outstanding debts by exchanging them between financial institutions and minimize dependencies. However, it is in nobodies interest to do that since one of them might actually find out it holds too much debt.
