Derivatives: The Unregulated Global Casino for Banks
SHORT STORY: Pick something of value, make bets on the future value of “something”, add contract & you have a derivative.
Banks make massive profits on derivatives, and when the bubble bursts chances are the tax payer will end up with the bill.
LONG STORY: A derivative is a legal bet (contract) that derives its value from another asset, such as the future or current value of oil, government bonds or anything else. Ex- A derivative buys you the option (but not obligation) to buy oil in 6 months for today’s price/any agreed price, hoping that oil will cost more in future. (I’ll bet you it’ll cost more in 6 months). Derivative can also be used as insurance, betting that a loan will or won’t default before a given date. So its a big betting system, like a Casino, but instead of betting on cards and roulette, you bet on future values and performance of practically anything that holds value. The system is not regulated what-so-ever, and you can buy a derivative on an existing derivative.
Most large banks try to prevent smaller investors from gaining access to the derivative market on the basis of there being too much risk. Deriv. market has blown a galactic bubble, just like the real estate bubble or stock market bubble (that’s going on right now). Since there is literally no economist in the world that knows exactly how the derivative money flows or how the system works, while derivatives are traded in microseconds by computers, we really don’t know what will trigger the crash, or when it will happen, but considering the global financial crisis this system is in for tough times, that will be catastrophic for the world financial system since the 9 largest banks shown below hold a total of $228.72 trillion in Derivatives – Approximately 3 times the entire world economy. No government in world has money for this bailout.
Lets take a look at what banks have the biggest Derivative Exposures and what scandals they’ve been lately involved in.
Click to enlarge, if you dare…
Click to enlarge…
Wow…
Time to put a fork in it folks…
We’re done…
~
The only salvation will be to restructure all debt and let the banks take a hit, is the only solution, but the Bankster are to powerful and wont let that happen so……… Armageddon sooner or later !
Wow a must see and read ! excellent post !
Other than to continue to expose these people, all bets are on hunkering down when the explosion occurs.
It’s time the “guys with the gold” were forbidden to make the rules. TBTF? Bullshit, let them fail and allow the stockholders and execs to lose everything.
I have been saying this for some time.
The real financial exposure is derivatives and CDO’s
Somewhere north of 200 Trillion. It completely out shadows the housing market, healthcare and even the national debit.
The last Official US government stats I saw, from a year ago, put it north of 240 Trillion, and that was just for the top 5 banks. The too big to fail banks. Sorry but the derivative exposure is so large, even if we wanted to the US does not have the ability to bail them out.
Where does the money go, well there is a giant sucking sound and the real asset value has been sucked out to off shore banks in places like the Cayman Islands, leaving a pile of worthless derivatives behind.
the point here is that there are no reserves or regulation on this market. and you can bet it is tied to the u.s. housing market and mortgages. it is all controlled and run by the big banks and it is past gambling. It is megatonnage bomb waiting to go off. and it will.
David
Nice graphics – Solution? A debt jubilee, fix the problem in one swoop world wide.