Posted on 09/28/2014 7:00:07 PM PDT by SeekAndFind
When is the U.S. banking system going to crash? I can sum it up in three words. Watch the derivatives. It used to be only four, but now there are five "too big to fail" banks in the United States that each have more than 40 trillion dollars in exposure to derivatives. Today, the U.S. national debt is sitting at a grand total of about 17.7 trillion dollars, so when we are talking about 40 trillion dollars we are talking about an amount of money that is almost unimaginable. And unlike stocks and bonds, these derivatives do not represent "investments" in anything. They can be incredibly complex, but essentially they are just paper wagers about what will happen in the future. The truth is that derivatives trading is not too different from betting on baseball or football games. Trading in derivatives is basically just a form of legalized gambling, and the "too big to fail" banks have transformed Wall Street into the largest casino in the history of the planet. When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.
If derivatives trading is so risky, then why do our big banks do it?
The answer to that question comes down to just one thing.
Greed.
The "too big to fail" banks run up enormous profits from their derivatives trading. According to the New York Times, U.S. banks "have nearly $280 trillion of derivatives on their books" even though the financial crisis of 2008 demonstrated how dangerous they could be...
American banks have nearly $280 trillion of derivatives on their books, and they earn some of their biggest profits from trading in them.
(Excerpt) Read more at theeconomiccollapseblog.com ...
What Cooked The World’s Economy?
http://www.freerepublic.com/focus/f-news/2209313/posts
And...
Here’s the link for the evidence in the information from the “Bank for International Settlements,” as mentioned in the full version of the excerpted article linked above.
http://www.bis.org/publ/otc_hy0805.pdf
...and a quote from it.
“The over-the-counter (OTC) derivatives market showed relatively steady growth in the second half of 2007, amid the turmoil in global financial markets. Notional amounts of all categories of OTC contracts rose by 15% to $596 trillion at the end of December (Table 1), following a 24% increase in the first half of the year.1”
More on what happened in 2007-2008.
China’s imploding US ally (AIG)
http://www.freerepublic.com/focus/f-news/2084468/posts
AIG: Inquiring Minds Want To Know
http://www.freerepublic.com/focus/f-news/2192489/posts
(China)
Fed won’t say who helped by AIG rescue
http://www.freerepublic.com/focus/f-news/2200398/posts
Top U.S., European Banks Got $50 Billion in AIG Aid
http://www.freerepublic.com/focus/f-bloggers/2201213/posts
China appeals to Washington to safeguard assets
http://www.freerepublic.com/focus/f-news/2205693/posts
U.S. Federal Reserve to buy up to US$300B long-term Treasury bonds
http://www.freerepublic.com/focus/news/2209403/posts
This county cannot afford a repeat of 2008.
It seems that we’re living on borrowed time. I wonder how long we can continue to limp along like this.
That looks like the stack of diapers my 2 kids went through in 2 years.
The debt that is “out there” is astounding; it is nation killer stuff without firing a shot. I too have wondered what the U.S. economic collapse will trigger. Not to be a doom and gloomer, but things cannot keep going the way they have been. The “Federal Reserve” literally printed money out of thin air for many years keeping the financial trading “up”. Now we have obamacare that is working on seizing 1/6th of the nations economy and throngs of municipals and states that simply cannot keep up with union pensions.
The only question in my mind is not “if”, but when does this implode?
I am a derivatives trader and you are ignorant about the topic. Anything else I were to say about your post would lack charity so I will end my reply now.
Should derivative be made illegal? They’re turning betting into an asset in which they could trade it with others. It feel almost like a ponzi scheme
Whatever...does the word hedge mean anything to you or do you think it is a gardening term?
Without speculators there is not a liquid supply of counterparties for hedgers.
Come back to me in five years and tell me I’m still a fool, assuming you can afford a dime for the pay phone. :)
Should Conservative support making Derivative illegal?
If they are in fact just digits on a hard-drive somewhere why will it take down the world economy? Let us say I was importing iron ore from Brazil and exporting, I dunno, new tires to Brazil. These are actual physical trades.
Nobody ever seems to explain. It always goes from:
Derivatives are just bets on bets and aren’t supporting by anything all the way to it will destroy the world. Eyes glaze over from these descriptions because they don’t seem to be linked.
Obama policies favor bigger and bigger banks and fewer and fewer small banks
I guess we’d better find all the neighbors who have/make/grow things that can be bartered and prepare for the worst.
All D-F did was make small, local banks more vulnerable to be gobbled up by the majors, and make the average American citizen a terrorist suspect every time they deposit or withdraw money.
Where is Chris Dodd anyway? Probably on some exclusive beach with Jon Corzine.
I think the “insurable interest” thing was the key in the earlier posts.
So the question is .... would you rather be the person who owes more debt than you can ever pay back... or the person who loaned you the money? And if you’re the lender.... are you really going to force the borrower into bankruptcy knowing you can never get any of your money back, or any assets once you do that?
Should Conservative support making Derivative illegal?
I think it’s too late.
“I am a derivatives trader...”
Really? What looks good for tomorrow morning? (just between you and me...)
Or, put it this way - it’s 4:00pm tomorrow - what am I kicking myself for not having bought?
True, but I could live with that. The cost of the derivative would adjust to meet the supply-demand.
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