1,000,000,000,000,000.00 Derivatives crisis - The Orange Mane

watermock · 10-07-2008, 09:01 AM

$1 Quadrillion of Unregulated Debt At Core of Coming Derivatives Crisis

American Free Press

Fri, 26 Sep 2008 07:34:00

(American Free Press) -- Despite all the blather and swearing-on-the-Bible pronunciamentos from establishment “pundits,” our house-of-cards financial system is not fundamentally sound.

Expect such indices as the Dow to tumble even much lower when the Pandora’s box of derivatives is fully opened.

Believe it or not, the Dow is still not far from its all-time peaks, with a lot further to fall. The depression is still in its early stages. We are looking at $1 quadrillion of unregulated debt, with much of it at risk. (And we used to think $1 trillion was a lot.)

These are literally inconceivable sums. Counting one dollar per second, it would take 32 million years to count to one quadrillion.

The stock market in this era of the privately owned Federal Reserve Bank is a giant craps shoot. Much of it is quite unregulated, especially the invisible market of derivatives. The sub-prime mortgage market collapsed, which is now being followed by a giant credit crisis. Now we are looking at the possible collapse of the derivative market.

President Bush failed at every business he has been associated with. He has always had his dad to bail him out to avoid bankruptcy. But this time his dad and even Henry Paulson can’t keep Bush from facing the failure of his economic policies at the helm of the U.S. economy.

America’s oversized debt pyramid has just begun to wind down. The Federal Reserve has announced that it is giving an $85 billion loan to American International Group (AIG), the world’s largest financial conglomerate, in exchange for a nearly 80 percent stake in the firm.

The Associated Press calls it a “government takeover,” but as Ellen Brown, J.D., author of The Web of Debt, says, this is not a real nationalization like the purchase of Fannie Mae/Freddie Mac stock by the U.S. Treasury. “The Federal Reserve,” she points out, “has the power to print the national money supply, but it is not actually a part of the U.S. government.

It is a private banking corporation, owned by a consortium of private banks. The private banking industry just bought the world’s largest insurance company.” But they used taxpayer money to do it.

Proposals for reforming the banking system are not even on the radar screen of establishment politics, but the current system is collapsing at train-wreck speed. Says Brown: “We need to stop funding the culprits who brought us this debacle at our expense. We need a public banking system that makes a cost-effective credit mechanism available for homeowners, manufacturing, renewable energy, and infrastructure; and the first step to making it cost effective is to strip out the swarms of gamblers, fraudsters and profiteers now gaming the system.”

John Tiffany is the copy editor for American Free Press. He is also the assistant editor of THE BARNES REVIEW (TBR) historical magazine. For a sample copy of TBR (editor’s choice) send $3 to TBR, P.O. Box 15877,Washington, D.C. 20003.

Just What Are Derivatives?

Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options and [b]swaps.[b]

The main use of derivatives is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), bonds, interest rates, exchange rates or indexes (such as a stock market index, consumer price index (CPI)—inflation derivatives—or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs.

Stock index futures and options are known as derivative products because they derive their existence from actual market indices, but have no intrinsic characteristics of their own. In addition to that, one of the reasons some believe they lead to greater market volatility is that huge amounts of securities can be controlled by relatively small amounts of margin or option premiums. One reason derivatives are popular is because they can be transacted off balance sheets.

http://www.inteldaily.com/?c=139&a=8301

baja · 10-07-2008, 09:38 AM

The amazing thing is that number is low. By 10x

watermock · 10-07-2008, 10:10 AM

damn, I think I'm missing a set of zeros. fixed it

Credit card companies keep sending me checks tho...I got a stack of em, I'm planning on going out with a bang.

Rohirrim · 10-07-2008, 11:11 AM

It is a private banking corporation, owned by a consortium of private banks. The private banking industry just bought the world’s largest insurance company.” But they used taxpayer money to do it.

That just gives you a chill, eh? I think we have to just wipe our entire economic structure off the map, return all the numbers to zero, and start over. Game Over!

TheDave · 10-07-2008, 12:14 PM

The 1 quadrillion number is the notional value of all derivatives. That means that every possible pay-out scenario combined is 1 quadrillion. Obviously it is impossible for every scenario to come to light since the majority of them are counter arguments to each other. Additionally, yesterday several trillion dollars worth of derivatives hit the auction block with the Leehman sale. I didn't hear a word about it... My bet is this "Derivative" scare is not what people think.

Now don't get me wrong there can still be problems that arrive from it especially with the liquidity issues.... But pretending that this 1,000,000,000,000,000.00 is suddenly going to come due and payable is not reality.

ak1971 · 10-07-2008, 12:19 PM

Quote:

Originally Posted by TheDave

The 1 quadrillion number is the notional value of all derivatives. That means that every possible pay-out scenario combined is 1 quadrillion. Obviously it is impossible for every scenario to come to light since the majority of them are counter arguments to each other. Additionally, yesterday several trillion dollars worth of derivatives hit the auction block with the Leehman sale. I didn't hear a word about it... My bet is this "Derivative" scare is not what people think.

Now don't get me wrong there can still be problems that arrive from it especially with the liquidity issues.... But pretending that this 1,000,000,000,000,000.00 is suddenly going to come due and payable is not reality.

really

? damn... I just finished digging my bunker.

TheDave · 10-07-2008, 12:22 PM

Quote:

Originally Posted by ak1971

really

? damn... I just finished digging my bunker.

Hey if nothing else it's a good place to go when your in the dog house with the wife.

ak1971 · 10-07-2008, 12:23 PM

Quote:

Originally Posted by TheDave

Hey if nothing else it's a good place to go when your in the dog house with the wife.

well I guess I may as well move in there

TheDave · 10-07-2008, 12:24 PM

Quote:

Originally Posted by ak1971

well I guess I may as well move in there

I leave the door unlocked... I've been here since you stopped digging last week.

gyldenlove · 10-07-2008, 01:21 PM

It is kind of funny, a pyramid marketing scam in its simplest form is one guy selling a product to a handful of people to have them sell it on to a handful each and so on and so forth. Eventually there will not be enough people to buy the products and the people at the top will have made a bundle of cash.

Compare that to the stock market, one guy starts a company, then sells part of it to others. In order for these people to make money they have to sell their stock to other people, and they have to sell their stock to other people, eventually there are not enough people to buy the stocks and the people in the beginning will have made a bundle of cash.

Both schemes rely on having a product you can sell at ever increasing prices so every link in the chain can make a profit. The fundamental falacy in both schemes is that they rely on a continous stream of new links to the chain to keep the flow of cash pointing in the right direction. The only real difference in the 2 schemes is that in one you sell a consumable product with some inherent value and in the other you sell ownership of a more or less intangible entity with a very variable value.

mhgaffney · 10-08-2008, 02:36 AM

We're probably weeks -- maybe days -- away from the general sinking realization that Paulson's bail out plan is not going to work.

At that point Paulson will be discredited -- and he will have to be replaced -- but by whom?

Let us recall -- Paulson was formerly the CEO of Goldman Sachs. Let us call him Mr Speculator. So - why would such a man be named as the Sec of the Treasury in the first place?

His appointment shows the incredible stupidity and also the crass arrogance of our rulers. Of course, I am referring to Mr GW Bush, who appointed Paulson.

Will Paulson's replacement be another of his ilk? I mean another Wall Street con artist? Or will it be someone who actually cares about the general welfare?

Did anyone notice? 400 economists opposed the bail out. They said it would not work. Yet -- there were no hearings on Capitol Hill! Why did Congress not convene at least one day of hearings - to hear from these 400 experts?

Instead -- the Democratic leadership rushed to Paulson/Bush's rescue. The Dems rammed through the bail out the same way the Bush administration rammed through the Patriot Act in 2001.

We live in a nation devoid of leadership. The blind are leading the blind. But our ship of fools is about to crash on the rocks.

MHG

watermock · 10-08-2008, 06:50 AM

The ripple effect is allready happening anyway overseas.

BTW, what happened to the bill to reduce these 35% CC rates?

L.A. BRONCOS FAN · 10-08-2008, 07:39 AM

"A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar? It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent. But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing." 10/7

Rohirrim · 10-08-2008, 07:43 AM

Putting taxpayers on the hook without anything in return could be a mistake, said Urban Backstrom, a senior Swedish finance ministry official at the time. “The public will not support a plan if you leave the former shareholders with anything,” he said.

Exactly! It is a violation of basic fairness. The American plan has been nothing but more cronyism. I hate to see Dems leading the charge to cover their favorite special interests' asses, but that's what is happening.

10-07-2008, 09:01 AM	#1
watermock "Hoodie Jr" "Hug me!" Join Date: Jul 2001 Location: Hot Springs, Ouachitah Posts: 77,090	1,000,000,000,000,000.00 Derivatives crisis $1 Quadrillion of Unregulated Debt At Core of Coming Derivatives Crisis American Free Press Fri, 26 Sep 2008 07:34:00 (American Free Press) -- Despite all the blather and swearing-on-the-Bible pronunciamentos from establishment “pundits,” our house-of-cards financial system is not fundamentally sound. Expect such indices as the Dow to tumble even much lower when the Pandora’s box of derivatives is fully opened. Believe it or not, the Dow is still not far from its all-time peaks, with a lot further to fall. The depression is still in its early stages. We are looking at $1 quadrillion of unregulated debt, with much of it at risk. (And we used to think $1 trillion was a lot.) These are literally inconceivable sums. Counting one dollar per second, it would take 32 million years to count to one quadrillion. The stock market in this era of the privately owned Federal Reserve Bank is a giant craps shoot. Much of it is quite unregulated, especially the invisible market of derivatives. The sub-prime mortgage market collapsed, which is now being followed by a giant credit crisis. Now we are looking at the possible collapse of the derivative market. President Bush failed at every business he has been associated with. He has always had his dad to bail him out to avoid bankruptcy. But this time his dad and even Henry Paulson can’t keep Bush from facing the failure of his economic policies at the helm of the U.S. economy. America’s oversized debt pyramid has just begun to wind down. The Federal Reserve has announced that it is giving an $85 billion loan to American International Group (AIG), the world’s largest financial conglomerate, in exchange for a nearly 80 percent stake in the firm. The Associated Press calls it a “government takeover,” but as Ellen Brown, J.D., author of The Web of Debt, says, this is not a real nationalization like the purchase of Fannie Mae/Freddie Mac stock by the U.S. Treasury. “The Federal Reserve,” she points out, “has the power to print the national money supply, but it is not actually a part of the U.S. government. It is a private banking corporation, owned by a consortium of private banks. The private banking industry just bought the world’s largest insurance company.” But they used taxpayer money to do it. Proposals for reforming the banking system are not even on the radar screen of establishment politics, but the current system is collapsing at train-wreck speed. Says Brown: “We need to stop funding the culprits who brought us this debacle at our expense. We need a public banking system that makes a cost-effective credit mechanism available for homeowners, manufacturing, renewable energy, and infrastructure; and the first step to making it cost effective is to strip out the swarms of gamblers, fraudsters and profiteers now gaming the system.” John Tiffany is the copy editor for American Free Press. He is also the assistant editor of THE BARNES REVIEW (TBR) historical magazine. For a sample copy of TBR (editor’s choice) send $3 to TBR, P.O. Box 15877,Washington, D.C. 20003. Just What Are Derivatives? Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options and [b]swaps.[b] The main use of derivatives is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), bonds, interest rates, exchange rates or indexes (such as a stock market index, consumer price index (CPI)—inflation derivatives—or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs. Stock index futures and options are known as derivative products because they derive their existence from actual market indices, but have no intrinsic characteristics of their own. In addition to that, one of the reasons some believe they lead to greater market volatility is that huge amounts of securities can be controlled by relatively small amounts of margin or option premiums. One reason derivatives are popular is because they can be transacted off balance sheets. http://www.inteldaily.com/?c=139&a=8301 Last edited by watermock; 10-07-2008 at 10:13 AM..

10-07-2008, 10:10 AM	#3
watermock "Hoodie Jr" "Hug me!" Join Date: Jul 2001 Location: Hot Springs, Ouachitah Posts: 77,090	damn, I think I'm missing a set of zeros. fixed it Credit card companies keep sending me checks tho...I got a stack of em, I'm planning on going out with a bang. Last edited by watermock; 10-07-2008 at 10:17 AM..

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10-07-2008, 09:38 AM	#2
baja It is what it Is. Pay attention. Join Date: Apr 2001 Location: in a bunker Posts: 54,358 Adopt-a-Bronco: Julius Thomas	The amazing thing is that number is low. By 10x

10-07-2008, 11:11 AM	#4
Rohirrim Partisan Human Cannonball Join Date: Jan 2003 Location: Twixt Hell & Highwater Posts: 49,092	It is a private banking corporation, owned by a consortium of private banks. The private banking industry just bought the world’s largest insurance company.” But they used taxpayer money to do it. That just gives you a chill, eh? I think we have to just wipe our entire economic structure off the map, return all the numbers to zero, and start over. Game Over!

10-07-2008, 12:14 PM	#5
TheDave Sauced... Join Date: Apr 2004 Posts: 15,120	The 1 quadrillion number is the notional value of all derivatives. That means that every possible pay-out scenario combined is 1 quadrillion. Obviously it is impossible for every scenario to come to light since the majority of them are counter arguments to each other. Additionally, yesterday several trillion dollars worth of derivatives hit the auction block with the Leehman sale. I didn't hear a word about it... My bet is this "Derivative" scare is not what people think. Now don't get me wrong there can still be problems that arrive from it especially with the liquidity issues.... But pretending that this 1,000,000,000,000,000.00 is suddenly going to come due and payable is not reality.

10-07-2008, 01:21 PM	#10
gyldenlove Ring of Famer Join Date: Mar 2006 Location: London, ON Posts: 10,130 Adopt-a-Bronco: Spencer Larsen	It is kind of funny, a pyramid marketing scam in its simplest form is one guy selling a product to a handful of people to have them sell it on to a handful each and so on and so forth. Eventually there will not be enough people to buy the products and the people at the top will have made a bundle of cash. Compare that to the stock market, one guy starts a company, then sells part of it to others. In order for these people to make money they have to sell their stock to other people, and they have to sell their stock to other people, eventually there are not enough people to buy the stocks and the people in the beginning will have made a bundle of cash. Both schemes rely on having a product you can sell at ever increasing prices so every link in the chain can make a profit. The fundamental falacy in both schemes is that they rely on a continous stream of new links to the chain to keep the flow of cash pointing in the right direction. The only real difference in the 2 schemes is that in one you sell a consumable product with some inherent value and in the other you sell ownership of a more or less intangible entity with a very variable value.

10-08-2008, 02:36 AM	#11
mhgaffney Ring of Famer Join Date: Apr 2006 Posts: 9,837	We're probably weeks -- maybe days -- away from the general sinking realization that Paulson's bail out plan is not going to work. At that point Paulson will be discredited -- and he will have to be replaced -- but by whom? Let us recall -- Paulson was formerly the CEO of Goldman Sachs. Let us call him Mr Speculator. So - why would such a man be named as the Sec of the Treasury in the first place? His appointment shows the incredible stupidity and also the crass arrogance of our rulers. Of course, I am referring to Mr GW Bush, who appointed Paulson. Will Paulson's replacement be another of his ilk? I mean another Wall Street con artist? Or will it be someone who actually cares about the general welfare? Did anyone notice? 400 economists opposed the bail out. They said it would not work. Yet -- there were no hearings on Capitol Hill! Why did Congress not convene at least one day of hearings - to hear from these 400 experts? Instead -- the Democratic leadership rushed to Paulson/Bush's rescue. The Dems rammed through the bail out the same way the Bush administration rammed through the Patriot Act in 2001. We live in a nation devoid of leadership. The blind are leading the blind. But our ship of fools is about to crash on the rocks. MHG

10-08-2008, 06:50 AM	#12
watermock "Hoodie Jr" "Hug me!" Join Date: Jul 2001 Location: Hot Springs, Ouachitah Posts: 77,090	The ripple effect is allready happening anyway overseas. BTW, what happened to the bill to reduce these 35% CC rates?

10-08-2008, 07:39 AM	#13
L.A. BRONCOS FAN Mo' holla fo' yo' dolla! Join Date: Dec 2002 Location: In a bunker in an undisclosed location Posts: 52,697	"A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar? It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent. But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing." 10/7

10-08-2008, 07:43 AM	#14
Rohirrim Partisan Human Cannonball Join Date: Jan 2003 Location: Twixt Hell & Highwater Posts: 49,092	Putting taxpayers on the hook without anything in return could be a mistake, said Urban Backstrom, a senior Swedish finance ministry official at the time. “The public will not support a plan if you leave the former shareholders with anything,” he said. Exactly! It is a violation of basic fairness. The American plan has been nothing but more cronyism. I hate to see Dems leading the charge to cover their favorite special interests' asses, but that's what is happening.