Why The Derivatives Time Bomb Is A Financial Weapon Of Mass Destruction The FED Cannot Fix
Alan Barton | All News PipeLine.com
Derivatives. Not much being said lately on them but a lot has been said on bank failures of as late. I do not understand why not, they are directly related. In math a derivative of a function is, in the most simple terms, “the rate of change of the function's output relative to its input value”. Easy enough, but in financial terms a derivative is “a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark”. Again, that sounds simple enough, but there is far more to it than the textbook mentions. Yes, far more to it. Ostensibly, they are used to “hedge a position, speculate on the directional movement of an underlying asset, or give leverage to holdings…. It's important to remember that when companies hedge, they're not speculating on the price of the commodity. Instead, the hedge is merely a way for each party to manage risk.” As a matter of fact, the frantic meetings of financial masters on both sides of the Atlantic seem to be trying to keep the entire financial system from blowing out. The collapse of Credit Suisse along with the collapse of Silicon Valley Bank and First Republic Bank would blow out the entire derivatives financial bubble. And what a bubble that is, as the rate of change is most assuredly NOT relative to its input value.
Wikipedia says the game of Craps is “a dice game in which players bet on the outcomes of the roll of a pair of dice. Players can wager money against each other (playing "street craps") or against a bank ("casino craps").” As I read through the rules and gaming strategies on that game, I see no difference between playing derivatives markets and shooting craps. Well, perhaps the amounts of money as I suppose hundreds or even thousands are a bit less than trillions and quadrillions of dollars. A number of recent articles have said that the total wealth of the world as a whole is around something a bit less than 500 trillion dollars. That is half a quadrillion dollars rounding up a bit. The estimated debt in derivative markets ranges from estimates of around 3 quadrillion to 4 plus quadrillion dollars. In other words, a failed large bet on the derivatives market has the chanced of destroying the entire worlds economy. And that is just what the recent spate of bank failures is doing. Please note that they are not regular banks, but investment banks; banks used to invest dollars (both real and imagined) into speculative hedges on mythical outcomes of the crap shoot called derivative markets.
Most of those banks scheduled or expected to fail (or are failing) are Investment Banks as opposed to ‘normal’ or Commercial Banks. What is the difference? Investopedia puts it in these terms; “Retail banks primarily focus on banking services for individuals” while “investment bank arranges capital raising for and provides advisory services to institutional clients that invest in capital markets and companies that seek capital.” The Glass-Steagall Act of 1933 separated Wall Street from Main Street as a direct consequence of the 1929 bank and stock market crash that nearly wiped out this nation and those failures were felt all over the world for many years. The primary purpose of World War Two was to push industrialization increases crawl out of that massive depression and FDR had a major hand in all of it. Glass-Steagellcreated a “firewall” between commercial banks and investment banks and also created the FDIC, the Federal Deposit Insurance Corporation which began as $2,500 maximum and because of the Frank-Dodd Act was raised to $250,000 in 2010. But the dragging down of commercial banks is inevitable and those smaller banks are starting to fail at increasingly large rates as the money fails to keep them solvent. It is seemingly not a matter of cascading failures like in falling dominoes as much as it may be more like a thermo-nuclear chain reaction.
One of the major points as stated in the act was to “provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes.” Fed chair Allen Greenspan thought that if banks were permitted to go into investment strategies with their customers then the greater possible profits could be made from the increase in return for their customers, or their depositors. Add in the fact that most of the information used in deciding on the status of investing in derivatives is base on rumor and hunches or fabricated narratives to bilk someone, and the very idea of posting any hard earned cash in one is tantamount to a guaranteed failure. I therefore have no pity for those who lost so much in the SVB failure and see the FDIC bailout as pandering to those who elect the “woke” monkeys that cause the business failures to begin with. In 1999 Bill Clinton signed the Financial Services Modernization Act, commonly known as Gramm-Leach-Bliley, which effectively (and the Frank-Dodd Act) neutralized Glass-Steagall by repealing key components of the act. This bit of maneuvering then led to the effective elimination of Glass-Steagall and led to the “Great Recession” of 2007-2008. It is also the entry for the looming Great Depression that we are now running into at full speed. The safety margins that G-S Act gave us are null and void, and we are witnessing firsthand the insane stupidity of those wealth madness driven actions.
Eleven years ago James Rickards said that the idea of derivatives is very dangerous and gave a selection of myths that they hold. Myth 1 is that “Derivatives break up risk into parts and allow the pieces to be put into strong hands best able to absorb losses.” The next Myth is that “Derivatives allow markets to get valuable price information about the underlying security or index on which the derivative is based.” The third myth is that “Bank management has derivatives risks under control using mathematical models that capture the complex interaction of factors embedded in derivatives trades.” He then concluded his article with this great line; “The next time some derivatives proponent says that derivatives reduce risk, increase transparency, and are well hedged, stop them in their tracks and ask if they believe in tooth fairies, Easter bunnies and leprechauns. Actually, it's safer betting on the leprechauns than in the soundness of modern derivatives finance. Since markets seem not to have learned from past disasters, one should expect worse to come.” Along with Warren Buffett referring to derivatives as "time bombs" and financial "weapons of mass destruction" we must then wonder why they are even permitted at all, let alone inside of “normal” commercial banks.
I think an article by Dennis Small captures the extent of the problems we face when he said “The imminent collapse of Credit Suisse, one of Switzerland’s most venerable banking institutions, founded 167 years ago in 1856, is causing at least as much panic across the entire trans-Atlantic financial sector as the March 10 bankruptcy of Silicon Valley Bank, and the imminent blowout of First Republic Bank, both of California. That’s because the collapse of Credit Suisse threatens to blow out the entire trans-Atlantic financial derivatives bubble.” He covers this with noting the top four American banks with the highest derivative exposure and gave the numbers as;
“JPMorgan Chase, with $54.3 trillion in derivatives, against $3.3 trillion in assets—a 16:1 ratio.
Goldman Sachs, with $51.0 trillion in derivatives, against $0.5 trillion in assets—a 99:1 ratio.
Citibank, with $46.0 trillion in derivatives, against $1.7 trillion in assets—a 27:1 ratio.
And Bank of America, with $21.6 trillion in derivatives, against $2.4 trillion in assets—a 9:1 ratio.
The top four U.S. banks hold a combined $173 trillion in derivatives exposure (89% of the total of all American banks), which stands in a 22:1 ratio to their combined assets of $7.9 trillion. (By contrast, China’s four largest banks have combined assets of $19 trillion, but their derivatives are estimated to be only some $7 trillion—a ratio of less than 0.4:1.)”
That looks to me as if Goldman Sachs is already a dead player, but now we have Biden and the Fed saying they can bail them out, when the law is that they CANNOT do so for Investment banks?
War has been launched against those who would get off of this sinking ship such as Russia and China along with the global majority to create a new economic system based on actual physical economic development as it should have been all along. As this financial crisis continues to echo back and forth across the Atlantic we see that the City of London, Wall Street and the City of the District of Columbia are engaged in shenanigans that dwarf the previous ones that caused World War Two. In other words, we can see that the Rothschild’s are behind what we are witnessing. Those war lords - umm, excuse me, I meant to say world financial wizards have determined to bail themselves out with hundreds of billions using fiat cash as only they can develop. The Feds will borrow monies from the Federal government (remembering that the Federal Bank is NOT part of the Federal Government at all) and we, the American Taxpayer, then must pay back which is impossible when the final tally is counted. Our work, our sweat, our toil drained to cover for the incompetence of investors in Investment banks and derivatives made in speculative and dangerous crap plays.
Tyler Durden in Zero Hedge said “The financial system is terminally broken, toast, kaput!” and that “Anyone who doesn’t see what is happening will soon lose a major part of their assets either through bank failure, currency debasement or the collapse of all bubble assets….The solidity of the banking system is based on confidence. With the fractal banking system, highly leveraged banks only have a fraction of the money available if all depositors ask for their money back. So when confidence evaporates, so do the balance sheets of the banks and depositors realize that the whole system is just a black hole….And this is exactly what is about to happen.”
“Currency debasement is not the cause but the effect of the banking Cabal taking control of the money for their own benefit. As Mayer Amschel Rothschild said in the late 1700s: “Let me issue and control a nation’s money and I care not who makes the laws”.
Sadly, as this Cassandra (me) has written about since the beginning of the century, the Death of Money is not just all currencies going to ZERO as they have throughout history.
No, the Death of Money means a total and final collapse of this financial system.”
Therefore, the new government owned and managed digital currency we will be facing that is so feared by intelligent folks the world over.
We cannot presume that the FDIC will actually save our savings as they are not government but the creators of this fiasco to begin with. The government has no money anyway, and neither does We the People. There are a few major hyper wealthy elites that own everything and those less wealthy will be taxed into poverty to try and cover the insurmountable debts that are arising and coupled with the ensuing hyper inflation we can see that real, regular people like you and me will be impoverished with little if any income, no government handouts, no pension, no outlook as money will be worthless. That is the cycle that seems all economies go through but his time it will not be just local or regional, but global and of a magnitude that is unimaginable. I suppose there might be some way to stop it, but I do not see how other than world war as has been done in the past. CBDC’s perhaps may be too late, and in the control of the wrong people, but at best those fiat electrons roaming around the governments computers means nothing. Everything is a rich man’s trick as shown in the attached video below.
Some say that gold is the savior, but it cannot be. Gold covers no American currency but is used only as support to get the government to borrow yet more fiat tokens of money while the government itself owns none; in 1971 Nixon created the free for all debt crises and massive money printing without any real basis when he closed the gold window. There is not enough gold in the whole world whether mined yet or imagined in mines to cover the debt we are witnessing now. Stefan Stanford in his March 19th article was on track when he said “The Chaos In America Today Will Be Nothing Compared To What's Dead Ahead” and I might add nothing compared to anything we have seen in our admittedly short history. 15 years ago in the Executive Intelligence Review John Hoefle wrote ““It is time to break the silence on derivatives,” Lyndon LaRouche said yesterday, after observing the carnage in the financial system and the pathetic response from the so-called regulators. “The true, hyperinflationary factor in the situation is the unregulated, insanely leveraged derivatives trade. This is what is killing us. This is the great crime of Alan Greenspan.”
“…the derivatives market as a “hyperinflationary bomb, crushing the international financial system,” and warned that “until you just shut down the whole derivatives trade—wipe these gambling obligations off the books of the financial system— you are just kidding yourself.” “Unless and until you deal with this derivatives bubble, which cannot be bailed out, you are just kidding yourself”. We must shut down the derivative market to have any hope to save what is left of the American economy, if war does not destroy it beforehand. The Hill had an article Monday that said “the Fed has borrowed $41 billion to pay its cash losses, but these borrowings do not count as U.S. Treasury debt and are not counted against the congressional Treasury debt ceiling limit”. Again, remember that the Fed is NOT part of the US government but a private “bank” under the control of international bankers. And not really an actual bank, but a criminal organization formed to control the nation and its people and its wealth by those same world’s central bankers that control the world’s wealth including the USA. Again, the below video covers the control they have on this world and not just the Rothschild’s but the worlds hyper wealthy as found in the City of London, the City of District of Columbia and Wall Street which constitute the various secret societies that are called, in their composite form, the New World Order.
One possible way out for the rest of the world is the so-called “New silk road” also called the Eurasian Land Bridge which is based on the time proven concept of actual production; of actual growth in industry, in natural resources, in the betterment of the people, in increases in energy production, in real, actual wealth creation. That is the concept behind the BRICS nations including all of the central and southern American states that are in with China, India, Russia and the others in replacing the existing central banking systems and powers. In other words, the exact same sort of things that made American growth from a remote wilderness outpost into the world greatest nation to ever exist and has been all but completely destroyed by those elitists in power at the present time. Liberty cannot be overemphasized in all of this, and the slave harnesses of the world’s central bankers as the primary restrictions of said Liberty. The Federal Reserve must be eliminated, the investment banks relegated to their original purpose, derivatives must be eliminated and all currencies put back in place as a representation of real values based on real production. I suspect it is now too late to start in our present degenerated state, but the beginnings would emerge after the coming destruction of the USA by those elitists and their wars to hide the destructions of our world.
There is so much more to this story, but that must wait for another time to be told.
May God bless and help us.
Original Article: http://allnewspipeline.com/Nuclear_Bomb_Ready_To_Drop_On_America.php