Saturday, October 15, 2011

Disasterous Financial Crisis Is At Hand: Derivatives - The $600 TRILLION Time Bomb That Is Set To Explode!

With all of the Jewish controlled media going absolutely APE the last few days with the incessant lies about Iran being a "threat" that must be taken care of,  which is fortunately a massive lie and con perpetrated by the US and their masters in Israel, we tend to forget about some other very important issues that have been unfortunately overlooked....

One of the biggest crises that this planet faces is the possibility of a "Derivative" Implosion in the world financial markets, that could spell total destruction of all countries on the planet by causing a total economic world collapse.  Right now, I want to present the following very important article from the website: Money Morning, at, entitled: "Derivatives: The $600 Trillion Time Bomb That Is Set To Explode" that gives a very frightening prospect of total economic collapse that is right now on our very door steps!  I do have some comments to follow:

Derivatives: The $600 Trillion Time Bomb That's Set to Explode

Do you want to know the real reason banks aren't lending and the PIIGS have control of the barnyard in Europe?

It's because risk in the $600 trillion derivatives market isn't evening out. To the contrary, it's growing increasingly concentrated among a select few banks, especially here in the United States. 

In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller

The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE:BAC) and Goldman Sachs Group Inc. (NYSE: GS).

Derivatives played a crucial role in bringing down the global economy, so you would think that the world's top policymakers would have reined these things in by now - but they haven't. 

Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market. 

Think I'm exaggerating? 

The notional value of the world's derivatives actually is estimated at more than $600 trillion. Notional value, of course, is the total value of a leveraged position's assets. This distinction is necessary because when you're talking about leveraged assets like options and derivatives, a little bit of money can control a disproportionately large position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than investments that could be funded only in cash instruments. 

The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble.

Compounding the problem is the fact that nobody even knows if the $600 trillion figure is accurate, because specialized derivatives vehicles like the credit default swaps that are now roiling Europe remain largely unregulated and unaccounted for. 


To be fair, the Bank for International Settlements (BIS) estimated the net notional value of uncollateralized derivatives risks is between $2 trillion and $8 trillion, which is still a staggering amount of money and well beyond the billions being talked about in Europe.

Imagine the fallout from a $600 trillion explosion if several banks went down at once. It would eclipse the collapse of Lehman Brothers in no uncertain terms. 

A governmental default would panic already anxious investors, causing a run on several major European banks in an effort to recover their deposits. That would, in turn, cause several banks to literally run out of money and declare bankruptcy.

Short-term borrowing costs would skyrocket and liquidity would evaporate. That would cause a ricochet across the Atlantic as the institutions themselves then panic and try to recover their own capital by withdrawing liquidity by any means possible.

And that's why banks are hoarding cash instead of lending it.

The major banks know there is no way they can collateralize the potential daisy chain failure that Greece represents. So they're doing everything they can to stockpile cash and keep their trading under wraps and away from public scrutiny. 

What really scares me, though, is that the banks 

think this is an acceptable risk because the odds of a default are allegedly smaller than one in 10,000. 

But haven't we heard that before? 

Although American banks have limited their exposure to Greece, they have loaned hundreds of billions of dollars to European banks and European governments that may not be capable of paying them back. 

According to the Bank of International Settlements, U.S. banks have loaned only $60.5 billion to banks in Greece, Ireland, Portugal, Spain and Italy - the countries most at risk of default. But they've lent $275.8 billion to French and German banks. 

And undoubtedly bet trillions on the same debt. 

There are three key takeaways here:

  • There is not enough capital on hand to cover the possible losses associated with the default of a single counterparty - JPMorgan Chase & Co. (NYSE: JPM), BNP Paribas SA (PINK: BNPQY) or the National Bank of Greece (NYSE ADR:NBG) for example - let alone multiple failures.
  • That means banks with large derivatives exposure have to risk even more money to generate the incremental returns needed to cover the bets they've already made.
  • And the fact that Wall Street believes it has the risks under control practically guarantees that it doesn't.
Seems to me that the world's central bankers and politicians should be less concerned about stimulating "demand" and more concerned about fixing derivatives before this $600 trillion time bomb goes off.

NTS Notes:  Readers, this is absolutely no joke.   What we are seeing is a serious financial crisis that has been secret from the public for a long time that now the criminals in charge of our collapsing economic systems can no longer keep it hidden.

What the United States did by removal of the Glass-Steagal laws back in the 1980's, that prohibited the expansion of Derivative trading, was to only inflame and inflate this insidious problem.    The truth is clearly shown in the figures in this article; The entire value of the Derivative market has ballooned to the point that it is now almost 10x the entire value of all assets on planet Earth itself.

And what is the American government doing to avoid a total economic collapse today, and to possibly avert a Derivative meltdown?   Rather than search for productive solutions to solve all of the economic woes that America faces, they are willing to hide the problems from the public by some twisted logic of bankrupting the nation even further through launching new wars around the world... and taking specific aim at Iran!

More to come



Hegelian Dialectic said...

I would say they are quite content with how things are. It's all going to plan. What could be better than a massive global financial collapse to usher in their solution - their global war number three? After that they offer the survivors a global currency, global government (police state) etc, because it was another war to end all wars blah blah, and the proles will lap it up.

It's that Hegelian thing. They use it all the time, we suckers fall for it all the time.

Situation normal.

Anonymous said...

To the American Public:

If you want more details about the Financial Crisis that's at hand.

Pick up both currant and back issues of"The Rolling Stone"mainstream publication magazine.

Read the Matt Taibbi articles on Wall Street.

He takes you step by step and shows you clearly what's going on