Monday, December 13, 2010

Derivatives: The QUADRILLION Dollar Financial Casino Completely Dominated By The Big International Banks

We are witnessing a world wide economic collapse that is slowly unfolding before our very eyes.   It does not take a rocket scientist to see that all major countries on this planet are in deep trouble through the practice of private banking fractional monetary reserves based on criminal debt usury.   History has always shown that countries that have adopted this criminal financial system eventually collapse under their own weight of un-payable debt.  THIS alone might seem scary enough, but the biggest threat that would not only spell total economic collapse but possibly destroy the entire world economically, is the danger of the entire Derivatives market collapsing!

To better understand the terrible threat that Derivatives pose, especially in bringing about the collapse of the entire world economically,  I want to present the following article from,  entitled: "Derivatives, The Quadrillion Dollar Financial Casino Completely Dominated By The Big International Banks".   This is an important article, and the facts presented will shock you:

Derivatives: The Quadrillion Dollar Financial Casino Completely Dominated By The Big International Banks

If you took an opinion poll and asked Americans what they considered the biggest threat to the world economy to be, how many of them do you think would give "derivatives" as an answer?  But the truth is that derivatives were at the heart of the financial crisis of 2007 and 2008, and whenever the next financial crisis happens derivatives will undoubtedly play a huge role once again.  So exactly what are "derivatives"?  Well, derivatives are basically financial instruments whose value depends upon or is derived from the price of something else.  A derivative has no underlying value of its own.  It is essentially a side bet.  Today, the world financial system has been turned into a giant casino where bets are made on just about anything you can possibly imagine, and the major Wall Street banks make a ton of money from it.  The system is largely unregulated (the new "Wall Street reform" law will only change this slightly) and it is totally dominated by the big international banks.
Nobody knows for certain how large the worldwide derivatives market is, but most estimates usually put the notional value of the worldwide derivatives market somewhere over a quadrillion dollars.  If that is accurate, that means that the worldwide derivatives market is 20 times larger than the GDP of the entire world.  It is hard to even conceive of 1,000,000,000,000,000 dollars.
Counting at one dollar per second, it would take you 32 million years to count to one quadrillion.
So who controls this unbelievably gigantic financial casino?
Would it surprise you to learn that it is the big international banks that control it?
The New York Times has just published an article entitled "A Secretive Banking Elite Rules Trading in Derivatives".  Shockingly, the most important newspaper in the United States has exposed the steel-fisted control that the big Wall Street banks exert over the trading of derivatives.  Just consider the following excerpt from the article....
On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.
The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.
Does that sound shady or what?
In fact, it wouldn't be stretching things to say that these meetings sound very much like a "conspiracy".
The New York Times even named several of the Wall Street banks involved: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.
Why does it seem like all financial roads eventually lead back to these monolithic financial institutions?
The highly touted "Wall Street reform" law that was recently passed will implement some very small changes in how derivatives are traded, but these giant Wall Street banks are pushing back hard against even those very small changes as the article in The New York Times noted....
"The revenue these dealers make on derivatives is very large and so the incentive they have to protect those revenues is extremely large,” said Darrell Duffie, a professor at the Graduate School of Business at Stanford University, who studied the derivatives market earlier this year with Federal Reserve researchers. “It will be hard for the dealers to keep their market share if everybody who can prove their creditworthiness is allowed into the clearinghouses. So they are making arguments that others shouldn’t be allowed in."
So why should we be so concerned about all of this?
Well, because the truth is that derivatives could end up crashing the entire global financial system.
In fact, the danger that we face from derivatives is so great that Warren Buffet once referred to them as "financial weapons of mass destruction".
In a previous article, I described how derivatives played a central role in almost collapsing insurance giant AIG during the recent financial crisis....
Most Americans don't realize it, but derivatives played a major role in the financial crisis of 2007 and 2008.
Do you remember how AIG was constantly in the news for a while there?
Well, they weren't in financial trouble because they had written a bunch of bad insurance policies.
What had happened is that a subsidiary of AIG had lost more than $18 billion on Credit Default Swaps (derivatives) it had written, and additional losses from derivatives were on the way which could have caused the complete collapse of the insurance giant.
So the U.S. government stepped in and bailed them out - all at U.S. taxpayer expense of course.
As the recent debate over Wall Street reform demonstrated, the sad reality is that the U.S. Congress is never going to step in and seriously regulate derivatives.
That means that a quadrillion dollar derivatives bubble is going to perpetually hang over the U.S. economy until the day that it inevitably bursts.
Once it does, there will not be enough money in the entire world to fix it.
Meanwhile, the big international banks will continue to run the largest casino that the world has ever seen.  Trillions of dollars will continue to spin around at an increasingly dizzying pace until the day when a disruption to the global economy comes along that is serious enough to crash the entire thing.
The worldwide derivatives market is based primarily on credit and it is approximately ten times larger than it was back in the late 90s.  There has never been anything quite like it in the history of the world.
So what in the world is going to happen when this thing implodes?  Are U.S. taxpayers going to be expected to pick up the pieces once again?  Is the Federal Reserve just going to zap tens of trillions or hundreds of trillions of dollars into existence to bail everyone out?
If you want one sign to watch for that will indicate when an economic collapse is really starting to happen, then watch the derivatives market.  When derivatives implode it will be time to duck and cover.  A really bad derivatives crash would essentially be similar to dropping a nuke on the entire global financial system.  Let us hope that it does not happen any time soon, but let us also be ready for when it does

NTS Notes:  Again, to help people understand just how huge this 1 Quadrillion figure for the value of Derivatives really is, as stated in this article, the entire present value of everything on this planet is roughly around 50 TRILLION dollars.... Therefore Derivatives are valued at almost 20 times the entire economic value of Planet Earth today!

There has been much speculation that if Derivatives ever collapsed, it would spell the end of the entire world economically, and the world would be plunged into a new dark age!   It is no wonder that these criminal bankers that control the economies and this Derivatives casino, refuse to mention this danger in any major news outlets.  

The public definitely needs to be informed of this danger, and again as always it is up to bloggers to spread this truth around.   As this article states, keep your eyes on the Derivatives market, because if they ever did crash, it would definitely be duck and cover!

More to come



Pudgilius said...

For those who bothered to look (at sources like the BIS or OCC), the enormity of the derivatives market is less of a surprise. The rest of the article, and all of its implications, are correct, however.

The so-called bail-outs of countries such as Greece and Ireland are nothing more than bank bail-outs. Whilst the populations of these countries, and many others to follow, carry the costs, speculators are paid out in full; criminal.

Another point to stress; over 95% of these derivatives, issued, priced & manipulated by the big banks, are OTC. That means that they are not exchange traded. As a result, they do not have to comply with issuance rules & they certainly don't have to have active markets.

Due to the nature of derivatives (as pointed out, they have no existence on their own but are side bets on some other assets - although there are many 'derivatives on derivatives'), banks can issue an infinite amount of these instruments. They earn fees from this. Since most of these derivatives don't trade on recognised exchanges or, indeed, don't trade at all in the normal sense, banks make up their prices. Due to this, banks have been able to report huge, but fake, virtual profits. (To protect those banks further, accounting rules were even changed specifically to avoid these 'assets' being 'marked to market'. On a marked to market basis, the whole banking system would be grossly insolvent as many of these 'assets' are in fact worthless.)

So, yes, the global financial system is the largest crime syndicate in existence. It is controlled by a few large 'banks'. These 'banks' also largely control the financial levers of government. This is an enormous problem. Quite apart from the unbridled criminality and market rigging, it is impossible to bail out something many times the size of the real global economy.

People need to wake up to these crime syndicates and the accommodations of these criminals by the major governments; it is almost too late. (Incidentally, isn't it 'funny' how the mainstream media completely hides the true source of the global financial problems?)

TruthSeeker said...

"Nether lender not borrower be" William Shakespeare.

Usury is the canker that eats the blossom. But is the bread and butter of the Jews. Dare you let them starve?!

Northerntruthseeker said...

Thanks for the comments, Gentlemen...

I agree that Derivatives are the root cause of all of the bailouts over the last few years....

In spite of the bailouts though, the value of Derivatives has grown from some 1/2 Quadrillion to over 1 Quadrillion dollars in less than 3 years..... That is scary enough.....

Crime Syndicate that could destroy entire nations.... Sad but true!