“the Interest Rate Contracts, which comprise 84% (some $800 TRILLION) of the derivatives market....”
“After all, in 2008 the Credit Default Swap (CDS) market (which incidentally is only 1/10th the size of the interest rate-based derivative market) nearly destroyed the entire financial system. One can only imagine what would happen if the interest rate-based derivative market “
http://www.straightstocks.com/market-commentary/is-your-bank-a-failure-waiting-to-happen/
That whole house of cards is going to grenade...just a matter of exactly when and where....and the longer it takes, the greater the collateral damage.
This is the reason that TARP and the bailouts should never have happened. It just simply isn’t enough to prevent the inevitable-whenever that may be.
This is the reason that TARP and the bailouts should never have happened. It just simply isn’t enough to prevent the inevitable-whenever that may be.
I sincerely hope you are wrong, for all of our sakes. The global economy and financial system remain under tremendous stress, but the scenario you describe is far from the most probable outcome. It is reasonable to expect that the Fed’s QE efforts will reflate loan collateral asset values and improve corporate cash flows to the degree necessary to improve loan performance and reduce the risk of corporate default. This will go a long way toward easing conerns regarding the interest rate swap and CDS markets, respectively.
After having accomplished the foregoing some sort of new equilibrium can be established that may be more sustainable if the world can mitigate the Chinese over-saving, over-accumulating dollar denominated asset problem. It would be better if wiser hands were on the tiller in Washington and Treasury, but we can’t do much about that. As odious as Geithner is, he is knowledgeable about the relevant issues and is not a bad guy to have calling the shots at this time.