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 ...
Yes. It is a threat to national security and corrupts government officials.
Ethereal bits,yes,but still legal obligations that people will fight over to convert them to real goods & services.
One does not wipe a bank’s hard drive and expect clients to say “oh well my million dollars was just bits anyway”.
Looming financial collapse was a major reason for WWII. Germany couldn’t pay debts, so it killed creditors and seized assets of others.
——Its only money in a computer. Just move the decimal a couple places over and yer fine——
That’s a lot closer to the truth then people realize....
Except the decimel point on the dollar in my wallet also gets moved....
Think Mexican pesos ...not very long ago they were 100 pesos to the dollar....
Today, I can look it up....but it isn’t 100 to the dollar....not even close....
Commie! /s
bkmk
Only if you confuse bonds with derivatives.
Brooksley is funny. She makes up good stories.
You buy insurance on hour home and on your car don't you? What happens if there is a major earthquake in your city and your insurance company declares bankruptcy and doesn't pay? Your insurance was a derivative. It was a hedge against a financial loss.
Someone was saying conservatives should ban derivatives. But if you own 500 shares of stock and you sell a covered call option on it? We're suppose to ban that activity? A covered call is a derivative.
The government insures your savings account up to 100k so you won't have loss. We gonna ban that activity too?
Warren Buffet is a liberal and liberals lie.
“DERIVATIVES ARE FINANCIAL WEAPONS OF MASS DESTRUCTION.”
Berkshire Profit Advances 49% on Buffett’s Derivatives
But, I don’t feel strongly about it and what the heck do Warren and I know about it anyway.
Warren does know more than you. I can hear him laughing at you now.
No. Many derivatives are already thinly traded with speculators in the market. Take the speculTor out and the majority of hedging instruments would cease to exist.
Derivatives can’t be banned by conservatives because if they were the conservative would no longer be a conservative but a tyrant.
Derivatives can’t be banned by conservatives because if they were the conservative would no longer be a conservative but a tyrant.
When it happens it won’t be a repeat of 2008. It will be many times worse.
Baloney. US banks have much more capital and many fewer crappy mortgages. Oh yeah, they have trillions in excess reserves sitting in cash.
What has that got to do with zygotes?
Apples and oranges.
.......If the whole financial system collapses.... it doesn’t matter ... we’re all screwed. I agree. But it doesn’t take derivatives to make that happen........
Moving on after the foregoing mutual agreement, and based upon 43 years of borrowing for large real estate projects, I am going to respectfully dis-agree with you that a “derivative” should ever be regarded as JUST “Insurance”. It’s not.
When I used to go in a bank lobby to see my banker to borrow lots of money on a 150 unit Apt project, the first thing he wanted to see was my “personal balance sheet”.....and, whoa bubba if there was any mis-representing going on.
Flash forward to now on “derivatives”. “Derivatives”, at their lowest common denominator, are a “wager” or a “bet” by the bank on some future event unforeseeable by anyone but God himself. It’s almost sorta like betting that lightning will strike at a certain address on a certain day at a certain time, AND YOUR USIING OTHER PEOPLES MONEY TO MAKE THE BET! That scenario is not insurance. In Vegas, it’s called CRAPS! (love that game actually)
Back to my banker, and the construction development loan on an apartment project, if he saw ANYTHING on the ASSET’s side of my balance sheet he did not like, he would just summarily move it over into the liability side or just wipe it out or just shake his head and say re-do it. I remember his vivid admonition to me.......”that’s an Appraised Value”.........GAAP only allows COST on balance sheets submitted to obtain a loan. We don’t “bet” on appraised value of YOUR “assets”.
Now, here we are decades later, and the banks have made the biggest bet in the history of the universe not on an appraised value of a hard asset but quite literally just a “paper bet” backed by nothing, on what market value might be in years going forward. Because they did this with depositors money, it is a criminal act, in my opinion.
So, to make a few bucks NOW, the banks, with government regulatory connivance or disregard, or bribes, have RAPED their balance sheets over these past few decades just so they all could make a some big bucks now and never mind their depositors whose money they were using.
When a bank like JP Morgan, just naming one, is allowed to ignore GAAP, and Banking 101 on balance sheets, and run up a 70 trillion NEGATIVE NET WORTH balance sheet then the bankers and the government officials involved should all go to jail for life. In China, they would be executed. That’s ok with me too as they have stolen the peoples money and cannot pay it back and our government could not even begin to. One article says the total derivatives out there is 700 trillion! That paralyzes the mind!
Regarding your last sentence about the government’s guarantee of 100 k in deposits. I’m sure you know that in a rush on banks that guarantee is only able to cover a very tiny amount of total deposits. So, again, out government (both political parties) have robbed us and defrauded us again. In the coming collapse, you will lose your deposits. The government and the banks have already stolen them!
Now, some of my “smart” friends say “yeah, but oh well, the government will paper over it somehow”. For my kids sake, I hope so.
Can you name any banks that got in trouble by making these derivative bets?
I can name plenty that got in trouble by making "safe" mortgage loans. And they made those loans, USING OTHER PEOPLES MONEY!
When a bank like JP Morgan, just naming one, is allowed to ignore GAAP, and Banking 101 on balance sheets, and run up a 70 trillion NEGATIVE NET WORTH balance sheet
Wow! That's some imagination you've got. Can you show your math?
That’s ok with me too as they have stolen the peoples money and cannot pay it back
What did they steal? Where?
Well there are rumors on the web right now that China is about to revalue gold and silver very soon (next 2 weeks), which will place the BRICS Alliance in control of the Worlds monetary system.
Some people may ask what is the BRICS Alliance.
http://en.wikipedia.org/wiki/BRICS
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