No, try $90 Trillion:
‘But JP Morgan is already up to its neck in this soup, with $77 trillion of contracts. It will now have $90 trillion on its books, a sixth of the global market.
Risk is being concentrated further. There are echoes of the old reinsurance chains at Lloyd’s, but on a vaster scale.
The most neuralgic niche is the $45 trillion market for credit default swaps (CDS). These CDS swaps are a way of betting on the credit quality of companies without having to buy the underlying bonds, which are less liquid. They have long been the bête noire of New York Fed chief Timothy Geithner, alarmed that 10 banks make up 89 per cent of the contracts.’
To give you an example, let’s say one bank out of this 89% goes insolvent, that would be $8 Trillion dollars. What’s the U.S. total annual GDP? $14 Trillion or so. WHEN one of these banks (counterparties) goes bust, no person, institution entire U.S. people can stop it. The real question is WHEN this will happen and no longer an IF in my mind. When the house of cards falls, we will be eating government wheat & cheese. Do you really think our government needed to fill up it’s strategic reserve to 700 M barrels to bomb Iran, pleeeeease. Countries around the globe know this and are simply waiting for the firesale of our assets to plummet to pennies on the dollar. We’ll default on every promisary note to every U.S. and global investor and citizen alike.
Now here is what we can do to actually survive this intact (we will have pain no matter what):
1) Regulate Hedge Fund Leverage Now, Stop increasing risk
2) Declare National Financial Disaster, Use Executive Orders to de-regulate drilling and I mean ALL areas.
3) Use Treasury to subsidize $300 B into nuclear plants, biodeisel, solar & coal liquification. Lots more trains running biodeisel and repair old rail lines, we’re gonna need them!
4) Part of $300 B, say $50 B provide to SBA (small business administration). Get the service economy to work for the fiscally responsible commercial banks on energy independance that will create highly regulated investment vehicles for domestic investors.
5) Use all prominent Ivvy league business schools graduate students and have people like Buffett drill into the true financials of the subprime pig. Peel the skin back so the market can reach bottom and fiscally responsible Americans can then buy. Overseas buyers will also come in droves.
6) Stop cutting rates, but combat the inflation by creating competing product which will force speculators out of the oil market helping Joe six pack and the entire responsible financial system at the same time.
7) Be prepared for pain and to help out your neighbors as well as family. Also, as time progresses we had best be prepared for some kind of ‘make-good’ on this mess to other allies and trade partners. Nothing like turning allies into enemies and letting them have several years to stew over it. First we’ll fix America which also helps allies. Then we’ll make-good on a portion of money due. Lastly, we’ll be exporters and the global investor will come back to America.
Do this and we will quickly get out of depression and create millions of jobs through innovation. Don’t do it and expect severe depression and another global war.
“Do this and we will quickly get out of depression and create millions of jobs through innovation. Don’t do it and expect severe depression and another global war.”
Happy thoughts for 1 am on Easter Monday. But, JPMChase bought its rival for a song. Now to squeeze the workers into juice.
Very interesting response.. Thank you for the effort. But, you didn’t address my question: I wanted reasons why I SHOULDN’T be worried.... You just made me MORE worried. :-)
Many years ago, a good friend told me : When the banking system collapses (and it will) you don’t want to be invested in gold... you want to be invested in, lead. Preferably, the kind in the shape of bullets.
Your scenario makes me want to stock up...