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Mountain Of OTC Derivative WMDs Waiting To Explode
Jim Sinclair ^ | 9 13 09 | Jim Sinclair

Posted on 09/14/2009 4:12:10 AM PDT by dennisw

Size and major risk have been confirmed for those with the eyes to see and the ears to hear. It is exactly what I have been teaching.

Translation:

Unless financial contracts have standards there is no way to clear them.
Unless financial instruments have accurate means of daily valuation, there is no way to clear them.
OTC derivatives outstanding from 1991 to 2008 have no standards.
OTC derivatives outstanding from 1991 to 2008 have no sound means of true valuation in any time frame, certainly not from day to day.

With this being the incontrovertible set of facts:

The Bank for International Settlements is for the first time proposing the world’s central banks take over the financial risk of the entire mountain of more than one quadrillion one hundred and forty four trillion dollars (valuation before the change to "value to maturity" method valuation of nominal value of OTC derivatives) of OTC derivatives created from 1991 to 2008.

The reason is simple. This unchanged in size mountain of weapons of mass financial destruction as still sitting there ready to explode in the second chapter of the greatest double dip depression of 2007 – 2009.

Can you blame China for simply saying no to Western crack cocaine finance?

Now do you understand why China is buying raw materials, entering joint ventures and purchasing energy and raw material companies while utilizing their dollar instruments for payment?

Central Banks Must Coordinate Clearinghouse Oversight, BIS Says

Central banks must clear the derivatives overhang and are consirding offering emergency funds (bailouts)

Regulators are pushing for much of the $592 trillion market in over-the-counter derivatives trades to be moved to clearinghouses which act as the buyer to every seller and seller to every buyer, reducing the risk to the financial system from defaults.



TOPICS: Business/Economy
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1 posted on 09/14/2009 4:12:10 AM PDT by dennisw
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To: dennisw

TRANSLATION:
China is trading in its tremendous hoard of US Dollars for hard assets because it thinks this mountain of toxic derivatives will crumble and implode and kill the US Dollar and other currencies

So China is shedding US dollars to buy gold, silver and oil producing assets. Other commodities too


2 posted on 09/14/2009 4:16:09 AM PDT by dennisw (Free Republic is an island in a sea of zombies)
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To: dennisw

bookmark


3 posted on 09/14/2009 4:22:27 AM PDT by upchuck (New sign on my pickup: Are you a "Hope and Change" regretter?)
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To: dennisw
Central banks must clear the derivatives overhang and are consirding offering emergency funds (bailouts)

Regulators are pushing for much of the $592 trillion market in over-the-counter derivatives trades to be moved to clearinghouses which act as the buyer to every seller and seller to every buyer, reducing the risk to the financial system from defaults.

Sounds like a good idea to me. I don't know why the author is trying to induce panic.

4 posted on 09/14/2009 4:22:27 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: dennisw

China also said last week they were willing to walk away from their derivative contracts.

Uh oh.


5 posted on 09/14/2009 4:24:39 AM PDT by NeoCaveman (ladies and gentlemen we are winning.Now it is time to work twice as hard)
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To: Moonman62

Private risk transferred to public costs.

The world wide wealthy financial elite made their money, now dump this on the public, the masses.

Elite financial behaviour, like ghetto dwellers, remains the same.

You must like welfare, public housing, government union voted pension schemes.

By the way, I have a old envelope of noncollectable checks to me, would you please send my your address so that I can get the money. I’ll take 50 cents on the dollar and you can profit from the rest.


6 posted on 09/14/2009 4:38:12 AM PDT by Leisler
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To: dennisw
Sounds like someone has a *severe* gambling problem.

After all, that's essentially what derivatives trading amounts to.

7 posted on 09/14/2009 4:47:35 AM PDT by wolfcreek (http://www.youtube.com/watch?v=Lsd7DGqVSIc)
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To: Moonman62; All

http://www.freerepublic.com/focus/f-news/2338939/posts


8 posted on 09/14/2009 5:00:18 AM PDT by Leisler
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To: dennisw

The Chinese as late as the 60’s experienced millions dying of starvation and hundreds of millions surviving that starvation. Starvation is replete through Chinese history.

They were the first to use fiat paper money, and it ended very badly for them.

The whole communist experiment was based upon delusions printed on paper and followed slavishly.

So, I suspect the Chinese are not deluded by paper. They are a billion plus real people that need real food, real energy, real materials. They are, at heart a conservative rural people, and they don’t want to be shown so much the money, as the stuff. Big big piles of stuff.

If, something happens, they’ll have the stuff, and we will have paper.

Matter of fact the whole world is, thanks to Central Bankers, the Federal Reserve, LLC, run( sort of, not to great lately ) on paper. Paper incestuously tied to elites. A world wide elite class each and every day held in more contempt.( See anti Democrat AND Republican Tea Parties).

We could be seeing the death of the hundred year experiment of fiat, paper money. Hundred years of Communism down the drain, and now a hundred years of pseudo-scientific, progressive elitism paper money and Centralized Banking power.


9 posted on 09/14/2009 5:44:03 AM PDT by Leisler
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To: dennisw
"one quadrillion one hundred and forty four trillion dollars "

The first time I've seen the term "quadrillion" applied to dollars in anything other than a comedy sketch. Scary.

10 posted on 09/14/2009 5:56:07 AM PDT by cookcounty ("Education is not the filling of a bucket, but the lighting of a fire." ---Yeats)
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To: wolfcreek

“Sounds like someone has a *severe* gambling problem.

After all, that’s essentially what derivatives trading amounts to.”

Didn’t you know that they are valuable products that provide for an efficient market./S

Any product that is not based on real value should not be allowed in any form.

Reinstate Glass-Steagall 1933. Anyone with common sense knew that when it was modified it was going to be trouble. The gamblers were out to soak the rubes just like Las Vegas. I don’t feel the least bit sorry for the high flyers on WS because were paying and they are getting their bonus checks.


11 posted on 09/14/2009 6:11:02 AM PDT by A Strict Constructionist (We are an Oligarchy)
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To: A Strict Constructionist
I don’t feel the least bit sorry for the high flyers on WS because were paying and they are getting their bonus checks.

They got their money early, when it still has (had) value.

The earlier you get money in a Ponzi scheme, the better. The rest of us are taxpaying chumps who have been involuntarily assigned to make up the broad base of the Ponzi fraud pyramid.

12 posted on 09/14/2009 6:19:39 AM PDT by behzinlea
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To: dennisw

Further Trans;ation:

NObama has performed a heavy head start into destroying one of the basics of living in America...contract law.

We all participate in contract law each and every day. When I pick something off the grocery shelf and it says $3.29 on the shelf, I expect contract law to apply and for the checker to charge me $3.29...not a penny more.

But a car? Buy a house? Sign up to go take a class? Eat out? Every one of these transactions is based in contract law.

NObama took a huge bite out of contract law when he put GM and Chrysler into bankruptcy and re-arranged the ownership of stocks, declared the ownership of investments in a business with prioity rights of payment void, and didn’t pay the suppliers.

Destroying contract law will bring this country into chaos almost faster than a direct military attack.


13 posted on 09/14/2009 6:26:39 AM PDT by ridesthemiles
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To: A Strict Constructionist

Reinstate Glass-Steagall 1933. Anyone with common sense knew that when it was modified it was going to be trouble. The gamblers were out to soak the rubes just like Las Vegas. I don’t feel the least bit sorry for the high flyers on WS because were paying and they are getting their bonus checks.””

Clinton destroyed Glass-Steagall.


14 posted on 09/14/2009 6:28:40 AM PDT by ridesthemiles
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To: dennisw

We are so screwed.


15 posted on 09/14/2009 11:12:19 AM PDT by happygrl (Hope and Change or Rope and Chains?)
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To: happygrl

We are so screwed......

Countless trillions of dollars of derivatives and many of them gone bad. Why I hate Wall Street and banksters...and they get bailed out. The foxes who raided the chicken coop


16 posted on 09/14/2009 11:37:51 AM PDT by dennisw (Free Republic is an island in a sea of zombies)
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To: ridesthemiles

Clinton destroyed Glass-Steagall.....

Phil Gramm was instrumental and so was Bob Rubin
Republicans got it through Congress.
The vote was——>>>>

WIKIPEDIA
Repeal of the Act

The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by a Republican majority, basically following party lines by a 54-44 vote in the Senate[12] and by a bi-partisian 343-86 vote in the House of Representatives.[13] After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90-8 (one not voting) and in the House: 362-57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999. [14]

The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.[7]


17 posted on 09/14/2009 11:40:22 AM PDT by dennisw (Free Republic is an island in a sea of zombies)
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To: dennisw; All
This data is from August 2008:

All figures in $000 - so add three more zeros to the numbers in this chart:
Bank_deriv_exposure

Sources: FDIC/IRA Bank Monitor; Q1 2008 data shown in “bank only” rollup.   

Damn - $90 Trillion dollars derivative exposure for JPMorgan! No wonder the Fed "rescue"
of Bear Stearns  was via JPM - it was their own derivative exposure that was at risk.


And a lot of this is tied to Mortgage-Backed Securities - with the worst of THAT still ahead:
Next wave of US mortgage defaults - as of summer 2009

18 posted on 09/14/2009 12:09:18 PM PDT by BP2 (I think, therefore I'm a conservative)
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To: ridesthemiles

“Clinton destroyed Glass-Steagall.”

Along with a willing co-conspirator Republican Congress.


19 posted on 09/14/2009 1:38:41 PM PDT by A Strict Constructionist (We are an Oligarchy)
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To: ridesthemiles; A Strict Constructionist; behzinlea

There was a guy on CSPAN this morning from some FedGov dept. stating there has been NO regulation in the OTC derivative trading since before 1991.

BushI, Clinton, Bush II and now Barry are continuing the *game*


20 posted on 09/14/2009 1:59:35 PM PDT by wolfcreek (http://www.youtube.com/watch?v=Lsd7DGqVSIc)
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