``... the IMF has estimated that the same collateral [in the banking system] was reused 2.2 times in 2018, which means both the original owner plus 2.2 subsequent re-users believe they own the same collateral (often a US Treasury security). This is why US Treasuries aren't risk-free--they're the most rehypothecated asset in financial markets, and the big banks know this. Auditors can't catch this because GAAP accounting standards obfuscate it, as I'll explain later. What it all means is that, while each bank's financial statements show the bank is solvent, the financial system as a whole isn't. And no one really knows how much double-, triple-, quadruple-, etc. counting of US Treasuries takes place. US Treasuries are the core asset used by every financial institution to satisfy its capital and liquidity requirements--which means that no one really knows how big the hole is at a system-wide level. This is the real reason why the repo market periodically seizes up. It's akin to musical chairs--no one knows how many players will be without a chair until the music stops.''

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