The US implemented rules that next year the thieves involved in the derivatives markets will have to post capital, on the order by some estimates to be the entire value of the yearly US GDP which is roughly $15 trillion. In a year. They are trying to skirt this of course since they don’t have the money and they cannot just delever. This is a biggie.
What is a derivative
What is a derivative. Ok I will explain. Let’s say that you and I are a bank, or fund, or brokerage. Or just you and me personally. Let’s take the latter example. You and me personally. Just listen. There is no difference.
I could make a bet with you about the superbowl. I’ll pick that the SF Forty-niners will win. You say merely no they won’t. We make a bet (just like a bookie). I say ok the odds will be the SF will win and I want ten to one. U say hell no make that 5 to one. That’s too low, as any football fan would know… bla bla…. Now let’s get to the banks. But one more thing, This is a mere gamble between us two parties. K?
Now let’s get to the big one. The big show. The big bets, the big casino.
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World Wide there are about 1.5 quadrillion out in bets of various kinds on bad debt in the EU, and anything else you could name. Derivatives of this size are on anything that exists. You and me could make a contract, a bet on anything. It could be for any amount….ok?
Banks are doing this right now.
If the bet turns bad the only thing you can do is not pay, (the problem) and also sue. Sue? So what.
If you don’t pay if the bet is bad, well, then the counterparty takes the loss. See, the losses don’t disappear.
Ok now let’s look at the scale of this monster system of betting. The banks will all be wiped out….but let’s look at the scale.
Scale is a very important concept. It makes u realize the size of things in action…
So first, let’s look at what one point five quadrillion is. 1.5 quadrillion.
It is 1.5000,000,000,000,000 dollars. That is, 1.5 thousand trillion. Which is 1.5 thousand thousand billion. Which is 1.5 thousand thousand thousand million…shit we will have to start using scientific notation. E to the what?
Do u get the math?
The entire world GDP is roughly 50 $trillion. The derivative bets that are out in our ‘superbowl’ are 30 times the world GDP. IE… they have bet the entire world economic output leveraged thirty times.
I can make a contract with any of you subscribers. We can bet anything we want. It’s exactly the SAME.
They are doing this insanity.
Warning there is some cussing in here.
What the Fed did since 2008 was to take the remaining borrowing power of the US taxpayers and like throw this onto the burning wreckage of the for example AIG insurance derivatives bets. And Lehman. And and and an…
They threw our money to cover these bad bets. But now, since 2008 the derivatives outstanding have almost doubled. Or tripled. Guess what happens next?
World market synchronization
Now we have the world central banks doing the same thing. They are using the last dregs of public borrowing capacity to cover the mounting losses of these unimaginable bets, with the present leverage level at 30 times world GDP…
If you notice, aside from trade frictions and FX fluctuations which are getting smaller (due to mandatory synchronization or else everything collapses) all the world markets are following each other. My favorite example is the Dow and the Nikkei.
The Dow rises 50. The Nikkei rises 35. The Dow drops 50. The Nikkei falls 60. You can take this simple example and apply it to the world indexes. All the markets are synchronized. This is not good. I will explain. Well let me comment on that right here, it means a monster world market crash which will probably lead to world currency collapses. People like Bill Gross (nice name another topic tho) will be marooned. He will just not believe what happens.
Of course this synchronization is not exact but it’s obvious if you look at this, and it’s worldwide.
Back track is doom for thieves
Now here, we can back track to the derivatives discussion. They are totally unregulated. Now this also achieved the world market synchronization. Ultimately, when you are leveraged 30 to one, you will lose right? Try betting on the superbowl year after year, and get away and win a 30 to one bet. Every year. Aint gonna happen. Now these MBAs who run this crap, well maybe they know all this. Probably not tho. U know why I know that? Because if they knew what I know about records (databases) they would NOT BE STEALING. Stupid idiots.
Now here, we have all the money in the world as they say, IE (I am not exaggerating) the central banks, including the Fed, the BOJ, the BOC, the ECB and every other fool out there who is backing this system. If losses occur, the central banks (which are you and me effectively) are out of luck. We pay because the bank system will collapse. We will not be able to buy and sell. It’s that simple.
So you and I are hostages to these bets. The bankers know this. It is not accidental. They consider you and me just dumb ‘investors’.
Public treasury raiders
Now these bankers, who I am coming to despise, all they do is use leverage to effectively steal from the public under threat of financial collapse. They are not smarter than you, they have merely figured out how to raid the public treasuries, which are about to run out, by the way.
And while they do this, they fly around in their helicopters, and yachts and estates and laugh. They have no idea what is in store for them. I find that funny. Because what is GOING to happen, and mark my words, they will all be running for cover when this all blows up. They will be hiding.
The Network never forgets
What will happen is this. These thieves will all be brought to justice. Their every transaction is recorded in the world networks. Nothing is ever forgotten. It will all be reviewed, to the last penny. Maybe you don’t think so. But I am an expert on this exact topic so let me explain this.
Database back ups
I worked in the commercial database field as an Oracle DBA. To learn it was very hard and difficult. I spent easily the equivalent of a master’s degree in mathematics time wise. IE I Could have easily gotten a Math Master’s degree. That is how complicated this shit is.
When I was working for Oracle, I worked for huge institutions which ran gigantic databases. A database is simple a gigantic file system of data. Then what is done is the data is processed to answere questions….it’s incredibly powerful analytically.
I think the easiest example but which shows you the power of this, is a spreadsheet which was a fantastic invention. Now, when you change one cell on a spread sheet, see the whole thing recalculates. Right?
Well take this concept and multiply it by one billion times. I’m serious.
So not a one page spread sheet, but a one billion page spread sheet. That is the power of modern Oracle or IBM databases.
I was an expert at data recovery, and by Oracles standards, only a novice sort of. But. These systems are designed to retain data forever. I said forever. I mean forever. You don’t get me but you might in a moment.
I think I’m getting sexually excited.
These thieves, are stupid. I told you that the average thief in the financial industry does NOT KNOW that everything he has stolen is RECORDED!!! HAHAHAHAH.
Oracle and IBM databases and the internet as well are all designed to survive disasters, what is called a black hole scenario. IE a total destruction of one area of the database.
So to combat that risk, just follow me…databases were designed to be distributed and immediately too, IE every major serious database has like ten copies of it 24 seven dynamically (meaning instantly). The technology enables this.
Every theft every false bet in the derivatives markets can be traced back to every fucking thief. All that is necessary is to walk it back. Trust me. I know what I am talking about…There is NO destruction of a well-run commercial database. Ever.
I read a good comment by a police officer in a movie but it’s true. He said “who ever said thieves are smart?’
I love movies.
I hope this encourages all of you. My loyal readers. Because, the point of all this discussion here today is to remind you that the TRUTH will prevail eventually.
Chris Laird is a mathematician, Oracle systems engineer, and publisher of the PrudentSquirrel newsletter and the CurrenciesandMarkets newsletter.
Disclaimer: Chris Laird is not an investment advisor/professional. This article, and the PrudentSquirrel newsletter and alerts, are general market commentary only. They are not intended as specific advice. You should talk to your own investment professionals for specific advice. Information here is deemed reliable but should be verified by you if you think it’s important.
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