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Problem Bank List Updated: Sovereign Defaults Ahead?

Another big factor that is crushing Japan is their demographics. Japan's people have the oldest average age in the world, and the lowest birth rate. The population is declining. Plus they are a monolithic, xenophobic society that is not friendly to immigrants. Plus they are a nation of savers, and are run by a hide-bound bureaucracy. The result is declining internal consumption - and a social structure that is unlikely to react to change, and will not go out and spend stimulus money.

I do not have much faith in Japan's ability to rectify this short of some massive social upheaval.

Coming Soon: Banking Crisis of Historic Proportions

Reasonable analysis, however no mention was made of bailout support for banks and the very profitable operating conditions of an extremely steep yield curve currently in place.

Ultimately I think the government will play games with accounting, discount windows and TARP like mechanisms to prevent mass bank failures.

The FDIC will not fail; it has a blank check at the Fed. Yes it may have to raise rates on deposit insurance to recoup losses, but it has done that before.

Will their be pain? Of course. Will there be inflation? Almost certainly. Is it the end of the Republic? The idea is laughable - the real wealth of America is in its people and means of production which are still in place and are getting pissed off. It is a sleeping giant and you stick a pin in it at your great risk.

Yes the Fed is printing money very fast, but on the other side of the equation the massive deleveraging that is happening is equivalent to decreasing the US money supply by a factor of 3.

Ultimately this will result in a much smaller financial industry in the US, which is probably a good thing. While everyone blames government for loose interest policies the far bigger problem was excess leverage. If you think low interest rates increase the money supply too much, think again - excess leverage does a FAR more damage by decreasing the fraction in the fractional reserve equation.