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 www.moneymorning.com, 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:
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.
Tick...Tick...TickTo 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:
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