Are You Ready for the Bear Stearns or Lehman Moment of this Cycle?

What triggered the 2008 financial crisis? There were many factors involved, but at heart is the flaw underlying the credit-money financial system: maturity mismatching.

If I lend you money today and you agree to pay me back in 30 years, only extreme failure and extreme outlier events will cause bankruptcy. If you run into trouble in year 5, am I going to worry that you won't repay me in 25 years? Hardly. I may become concerned and get involved with your business to make sure I am paid, but if you have backed that loan with assets, then I'm not going to be worried much at all. I might offer no interest this year. Pay me year 5 and 6 interest next year, plus a little penalty. Both of us survive and thrive.

Banks borrow short and lend long though. If I take out a 1-year loan that I have to roll every year, and I lend you that money for 30 years, then your problem in year 5 is a big deal. It becomes my bankruptcy in year 5 because my lenders want their money now and if they decide they can't get it back from me this year, they (or another lender) might not lend to me for year six. My liquidity goes from 100 to 0 instantly. Game over. Financial crisis for me, and the whole economy if everyone is doing the same.

Now think about someone who is selling commodities in the future and sources the supply later. When markets are functioning, it is easy. Sometimes prices are volatile, but manageable. What happens when it becomes illegal to buy from the main supplier?