The next financial crisis will be hellish, and it’s on its way

Forbes ^ | November 17, 2011 | Addison Wiggin

[george76]

"There is definitely going to be another financial crisis around the corner," says hedge fund legend Mark Mobius, "because we haven't solved any of the things that caused the previous crisis."

We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out. We raised it again after seeing the remarks of Mr. Mobius...he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world's major banks are tangled up.

Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius' guess of 10 times the world's annual GDP. "Are the derivatives regulated?" asks Mobius. "No. Are you still getting growth in derivatives? Yes."

...

The Greek crisis is first and foremost about the German and French banks that were foolish enough to lend money to Greece in the first place. What sort of derivative contracts tied to Greek debt are they sitting on?

...

Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out

[Wolfie]

I suppose we could regulate derivatives. Nah.

[LomanBill]

 

 

" Uhhhh, that's not ours either! "

---Weiner, Obama, Perry, Pelosi, Frank, Pritzker and Associates, LLLP.

 

 

Follow the....

http://www.campaignmoney.com/finance.asp?type=in&cycle=08&criteria=pritzker&fname=penny

 

Billionaire business mogul Penny Pritzker is a member of one of America’s richest families and was the Finance Chair for the presidential campaign of Barack Obama.  It was Pritzker that led the prolific, and illegal, fundraising that helped power Barack Obama’s presidential campaign.  She was the chair of Chicago-based Superior Bank’s board for five years.  Pritzker was into subprime lending before it became all the rage starting in around 2000.  Prtizker's chairmanship was to concentrate on sub prime lending, principally on home mortgages, but for a while in subprime auto lending, too, after the Pritzkers' bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992. Back then they called it "predatory lending." Superior Bank went belly up in 2001 with over $1 billion in insured and uninsured deposits; 1,406 depositors lost much of their life savings.  This collapse came amid harsh criticism of how Superior’s owners promoted sub-prime home mortgages. On Nov. 1 [2002] the Federal Deposit Insurance Corp. pointed the finger at Ernst & Young, Superior’s auditor, in a fraud suit filed in federal court here.  But that action came two months after a group of Superior depositors accused the bank’s owners and directors, including two members of the Pritzker family, of racketeering....

[snip]

...Pritzker is chairman of Classic Residence by Hyatt, luxury senior living communities in 11 states; chairman of The Parking Spot, which owns and operates off-airport parking facilities in nine cities; chairman of the credit data company TransUnion and chairman of Pritzker Realty.  She also sits on the board of Global Hyatt and plays a role in numerous non-profit groups, including serving as chairman of the Olympic village portion of Chicago’s bid to win the 2016 Summer Games. 

 

http://www.theobamafile.com/_associates/PennyPritzker.htm

 

 

 

Nudge nudge nudge...

 

[LomanBill]

>>banks that were foolish enough to lend money to...

http://www.google.com/search?sclient=psy-ab&hl=en&source=hp&q=Deutsche+Bank+Argent+Mortgage

[LomanBill]

>>I suppose we could regulate derivatives. Nah.

 

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

http://www.pbs.org/wgbh/pages/frontline/warning/view/

[glorgau]

If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out

It's impossible to be "wiped out" when you can print money.

[arkady_renko]

Ugh.

[old curmudgeon]

Don’t kid yourself.

You are wiped out when no one will take your money.

How much Greek currency would you like to purchase today?

[GOPJ]

It's impossible to be "wiped out" when you can print money.

When money printed is worth less than toilet paper - and being used 'in place of' - it's 'wiped out'...

[runninglips]

I assume that is sarcasm...sometimes it is necessary to state your intentions.....or just your attitude on here.

[GeronL]

Its the end of the world as we know it.

Preppers were right. Too bad I’m too poor and live in the center of a major metropolitan area. I’m dead!

[napscoordinator]

Doom and Gloom. Wasn’t the World supposed to blow up a few months ago and then the prediction is December 2012. Another thing, we have been talking about the end of America since around 1776. Not going to happen!!!!!

[Clintonfatigued]

Your posting is comforting. I just hope it’s accurate.

[musicman]

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[driftdiver]

Thats what the romans said.

[napscoordinator]

Oh brother.....really? You really went all the way back to that timeframe. lol. Well you keep thinking that. Why not just go back to Russia that is a bit more realistic.

[driftdiver]

Of course, we all know there have never been periods of famine, rebellion, or war in the history of the world. This time its different because we have the right people in charge.

[redpoll]

>>>Doom and Gloom. Wasn’t the World supposed to blow up a few months ago and then the prediction is December 2012. Another thing, we have been talking about the end of America since around 1776. Not going to happen!!!!!<<<

History demonstrates otherwise. Counties, cultures, and civilizations come and go, ebb and flow, reach peaks and then collapse, sometimes with startling speed. The reason we’ve been talking about it since 1776 is that collapse is inevitable, like entropy, and it is the duty of each generation to be vigilant for decay and falling away from core values and beliefs. Our vigilance has not been very good lately.

Of course, you’re right that people will remain behind. After the sack of Rome, there were Romans. When the Incans collapsed, there were still Incans. If the United States falls away, there will still be Americans. People will do what people have always done and try to survive as best they can. And a new civilization will take the place of the old. Some of us like our current culture, though, and we’re not willing to easily abandon it.

God help us.

[napscoordinator]

it is the duty of each generation to be vigilant for decay and falling away from core values and beliefs. Our vigilance has not been very good lately.

I actually agree with this and that is why it is disturbing that FREEPERS are wanting Newt, Perry and Romney for President. Three candidates that a few years ago would not have even been considered. The Republicans today even on this site have become very liberal.....perhaps not as bad as the Democrats but certainly going more left than just a few years ago.

[gitmo]

Would someone please explain what a derivative is? Not the calculus derivative, the financial one.