Look up Chris Whalen on youtube if you do not know what a derivative time bomb is. There is so much info on it. Surprise you do not know anything about it. World is playing with 1500 trillion worth, which the US is involve with 700 trillion. Many of the transactions are done in shadow banking and not regulated in open, Why do you think the EU and US is desperate to not let Greece default? Greek GDP is very small in EU and the cost of default can be absorb by EU nations. Problem is no one knows what all the interlocking banks are on the hook for in the world of derivatives, SWAPS and etc that may be triggered by a Greek default. I think the US Fed knows. So far the Fed has practiced neutral QE, the new QE replaces the old maturing QE, but they cannot eliminate the QE unless they want to implode the financial system. The Fed is simply buying time for our economy and hope the economy on its own recovers or gov reduces deficit spending. In the mean time other nations are pursuing their own financial interests and needs. China is slinking away from T Bill purchases and Japan may do the same to finance their own aggressive QE. Someone needs to make up the T Bill shortfalls. Fed will need to create money, give to US banks to buy US T Bills, and sell it back to the Fed. That is the paper currency world we are living in. We are stuck in QE unless we go to war. Jim Rickards is the other guy you need to look up on youtube.
I know plenty about derivatives, not much about the imaginary time bomb.
World is playing with 1500 trillion worth
Yeah, notional values are very big. So what?
Problem is no one knows what all the interlocking banks are on the hook for in the world of derivatives,
Net, the derivatives are worth zero.
Fed will need to create money, give to US banks to buy US T Bills, and sell it back to the Fed.
But the Fed's balance sheet hasn't grown. The Fed hadn't bought anything, over the last year, according to the article above.
Bfl