Gobbled up by the derivatives monster

Asia Times ^ | Oct 21, 2008 | Richard Daughty

[Lorianne]

Clive Maund at clivemaund.com says, "Payback time for Wall St and Washington will be when foreign investors fail to turn up at the bond auctions to finance the bailout plan, whose US$800+ billion will have to be created out of thin air. So the bonds will have to be monetized, which will mean an immediate spike in inflation, which will cause the rate of corporate bankruptcies to soar as failing companies take down others in a chain reaction because the losses will be highly leveraged by credit default swaps etc. This is the underlying reason why banks won't lend to each other - they can't calculate the counterparty risk. All of this will set off a massive derivatives meltdown that will bring the whole system crashing down."

Well, I say that these foreigners will turn up to loan us money as long as we have weapons, technology, land and useful assets to sell them, but the time will soon come when they will be peddling them to us. In the meantime, how big is the derivatives monster that is going to destroy the world's economic system?

[Gasshog]

bumpforlater

[Alberta's Child]

Interesting food for thought, but I don’t see this kind of scenario unfolding right now. Interest rates on U.S. government bonds are at or near historic LOWS right now (and the value of the U.S. dollar has been climbing steadily in recent months). Despite the cost of the $800 billion bailout and the fact that the U.S. government is effectively bankrupt, foreign investors see this country as a much better risk than any alternatives.

[proxy_user]

Also, US households have $11 trillion in bank accounts and other non-stock savings.

[Travis McGee]

Yet the Fed, the Treasury and the politicians continue to think that they can 'fix' the problem by throwing more money at it. They do not understand that they can't 'fix' this economic crisis. They also do not understand that it is their trying to 'fix' things in the past that has created the current situation." He says that Nikolai D Kondratieff, the tragic Russian economist of the early 20th century, has foreseen all of this before, and thus, "What we are dealing with is the wrath of Kondratieff Winter, which is about the purging of excess credit. Along with that comes deflation, and along with that global stock markets enter into extended declines. Real estate declines, economic growth slows, commodities decline, bankruptcies accelerate as the excess credit is purged from the system, the banking system is shaken, the free market is blamed and we move toward national fascist political tendencies." Ominously, he sums up with "We are now seeing each and every one of these symptoms of K-wave winter."

[peeps36]

Richard Daughty has been doing a good job predicting the economic problems we are facing. He was warning people about this for the past three or four years. I would bet my money on him before I put it on the politicians or the fed. I don't know about you but I'm not too confident in the abilities of Barney,Nancy,Chris and the stooges at the fed.

[rabscuttle385]

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[rabscuttle385]

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[fightinJAG]

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