Well, if there was an interest rate hike, enough to trigger even a small fraction of the 340 Trillion in notational value of interest rate swaps, that would decimate 9 out of 10 of the large brokerage firms in the country, and probably five out of five of the biggest banks.
They wrote contracts and they don’t have what it would take to deliver.
Just like the silver short position.
They ain’t got it.
Nuff said.
If the Fed, knowing this, can’t raise interest rates, they have no way of attracting foreign investors.
So they are stuck. QE3, QE4, QE5, QE to in-fin-it-eee..
-——to trigger even a small fraction of the 340 Trillion in notational value of interest rate swaps, -—
That sentence is beyond my capacity. What is notational value of interest rate swaps?
We learn by asking
We have just seen our total national debt and our annual economic output intersect at around $16 trillion dollars. Now you say that the interest rate swaps which cover only the possible interest expense increases in variable interest rate loans total 340 trillion dollars, more than 21 times our annual economic output.
That is insane, and if true should be made illegal. If financial high flyers want to deal in such risky instruments they should do it with their own money and no depository banks should be allowed to ‘invest’ in such instruments.
But you have bought totally into a particular theoretical scenario. If there were any consensus we’d be hearing a lot more about it from far more financial analysts.
And if that should happen, they should be allowed to fail and the shareholders lose whatever they lose, and then they should be recapitalized under more conservative regulations. That’s what should have happened in late 2008.