OMG: $707 TRILLION in Derivative Contracts?

Discussion in 'Economy' started by JimBowie1958, Nov 26, 2011.

  1. JimBowie1958
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    JimBowie1958 Old Fogey

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    $707,568,901,000,000: How (And Why) Banks Increased Total Outstanding Derivatives By A Record $107 Trillion In 6 Months | ZeroHedge

    Can someone please explain to me why this is not as insane as it seems to be?
     
  2. snjmom
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    snjmom VIP Member

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    No.
     
  3. Douger
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    Douger BANNED

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    Don't be such a worrier. WW3 is in the works. You'll be fine.
     
  4. editec
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    editec Mr. Forgot-it-All

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    I confess that the games played in the dereivatives markets are beyond my ken, JB.

    The frightening conclusion that I have come to is that the mathamatics of dereivatives appears to also be beyond the ability of most of the PLAYERS THEMSELVES to fully understand their complex machinations.


    But one thing I DO know?

    It was the derrivative games that took down AIG.

    And I sense that AIG isn't the ONLY too big to fail organization that could collapse as a result of them blowing up in their faces.
     
  5. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    I've seen articles that state the total derivatives debt to be 1,500 Trillion and higher, and those are 2007 numbers.

    Rather than just go bankrupt, this is what the International Bankers are trying to get individual countries to sign on to through their corrupt leaders.
     
  6. expat_panama
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    expat_panama Silver Member

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    This happens a lot, people don't understand something so they decide it's bad. My experience is that the lack of understanding is by choice, as I've tried explaining the mysteries on these forums and nobody seems to want to find out that their new found enemy isn't so bad after all.

    My take is that this kind of behavior is so common that it's probably part of human nature, and it's the same humanity that's some how been raising an ever advancing civilization. I don't know how that can be possible but while I study it I'll accept the fact that it is. That's the smart thing to do. Derivatives have been around for centuries and they work. Refusing to learn about them and see their benefits is not smart.
     
  7. JimBowie1958
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    JimBowie1958 Old Fogey

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    lol
     
  8. JimBowie1958
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    JimBowie1958 Old Fogey

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    As I understand it, for any equity of value X there are at least 8*X in credit default swaps written on it. So how does the company selling all those CDS cover their obligations when a company LARGER than they are goes bankrupt?

    Editec is right about AIG and most of what took down AIG was all the CDS written on the derivatives market.

    There is not $707 TRILLION worth of capital in all the damned banks combined so this is all just electronic digits in some computer somewhere and the banksters are probably praying right now that they can keep running their ginormous Ponzi long enough to bail out and let the whole damned thing crash and burn after they got theirs.

    As to derivative contracts being around forever, maybe, though I doubt it. I do know that as recently as the 1940s most bankers regarded them as fools gold and wrote regs to keep them under control. Cant help but wonder what idiots let that demon out of the bottle.
     
  9. JimBowie1958
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    JimBowie1958 Old Fogey

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    Wow, if you have asource for that I would really appreciate it. Not that I dont trust you, but I cant find it and the guys I talk to what hand me my head on a platter (in a friendly way) if I mentioned that kind of money without a good source, lol.
     
  10. JimBowie1958
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    JimBowie1958 Old Fogey

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    I think you are exactly right.

    Did you read the blog article I linked to?

    Here's more:

    So what I take from all that is that:

    1. Banksters play with Nominal amounts in order to derive profit from the notional amounts outstanding. For example, they offer contracts worth (in theory) $100 million in order to derive profits in the millions USD. For the banksters the notional is not relevant as they never expect to have to pay up on the whole contract.

    2. These contracts are used to balance their books in some bean counter sort of way (I guess said contracts are assets or debits depending on what side you are on), and so one way of making up a short fall on their fractional reserve lending rate is to sell more of said derivative contracts to be able to list them as an asset. This is particularly troubling to me since I know alot of bad equities that contain poisonous subprime mortgage debt is sitting on the books as level three assets and have no real value to them, but as long as they dont try to sell them, the banks can continue to list them at the value they paid for them. In effect, probably most of these banks are already insolvent but can pretend to get by by fantasizing that their worthless Mortgage Backed Securities and CDOs are actually worth what they paid for them.

    3. So for banks to remain solvent and have a fig leaf of credibility in the bull shit stress tests, they have to sell ever more derivatives of some kind. But the more they sell, the more they expose themselves and their investers to collapse if the whole thing starts to crumble like it did in 2008.

    4. The events in Europe are essentially a matter of banks with all this hidden debt, worthless assets and growing obligations, getting their national governments to bail them out, while not fully informing the government of the whole picture. The governments foolishly take responsibility for these banks by bailing them out, and as time goes on the governments find out that the picture is worse than they had previously thought as the bankers come back with more and more bad news. And the governments get deeper and deeper into debt because they agreed to bail out these fuckers.

    5. As Europe unwinds all these intwined debts, one chain link slides off ( a bank or a government) and that then gives more weight to the total pulling more links off. Greece defaults and haircuts cause problems for banks in Italy, which in turn cause problems for banks in Spain and France, which in turn threaten the solvency of banks in the UK and Germany and they in turn might drag us over the cliff. Meanwhile the Chicoms are sweating like dogs hoping no one notices the collapse of their own little real estate bubble that they foolishly thought a totalitarian state could maintain indefinately.

    6. So take your pick which event will make the whole thing collapse. My bet is on Italy collapsing because the myth of European unity wont be enough to persuade the Germans and Brits to bail out Frances problem (Italy) in order that their potential problem (France and Spain) does not become reality. Like the stupid clod who would rather not pay his bill this month so he can have more cash to burn now, he gets caught with more obligations later. But he doesnt care because later is not now.

    Since the institution of politically correct ideology among our national elite, we stopped promoting our best and brightest to the top of our society in its various roles.

    Instead we are led by lap dogs who are not so good at analysis and corrections as they are at sycophancy, fast talking and pretending that looming problems will be put off long enough for them to grab their loot and run for the hills.

    God save us all.
     
    Last edited: Nov 27, 2011

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