With leveraging, there will always exist a possibility, however remote, of a chain reaction, a cascading sequence of defaults that will culminate in financial implosion if it proceeds unchecked. “Only a central bank, with its unlimited power to create money can with a high probability thwart such a process before it becomes destructive. Hence, central banks will of necessity be drawn into becoming lenders of last resort.”— Chairman of the US Federal Reserve, Alan Greenspan, in his speech t…
