JP Morgan, Citigroup , Goldman Sachs, BofA, all gone

Derivatives: The $600 Trillion Time Bomb That's Still Set to Explode

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In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.
The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc. (NYSE: GS).
Derivatives played a crucial role in bringing down the global economy, so you would think that the world's top policymakers would have reined these things in by now - but they haven't.
Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market.
The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble.
Imagine the fallout from a $600 trillion explosion if several banks went down at once. It would eclipse the collapse of Lehman Brothers in no uncertain terms. A governmental default would panic already anxious investors, causing a run on several major European banks in an effort to recover their deposits. That would, in turn, cause several banks to literally run out of money and declare bankruptcy.
Short-term borrowing costs would skyrocket and liquidity would evaporate. That would cause a ricochet across the Atlantic as the institutions themselves then panic and try to recover their own capital by withdrawing liquidity by any means possible.

And that's why banks are hoarding cash instead of lending it.

The major banks know there is no way they can collateralize the potential daisy chain failure that Greece represents , for example. So they're doing everything they can to stockpile cash and keep their trading under wraps and away from public scrutiny.


Although American banks have limited their exposure to Greece, they have loaned hundreds of billions of dollars to European banks and European governments that may not be capable of paying them back.

According to the Bank of International Settlements, U.S. banks have loaned only $60.5 billion to banks in Greece, Ireland, Portugal, Spain and Italy - the countries most at risk of default. But they've lent $275.8 billion to French and German banks.

And undoubtedly bet trillions on the same debt


I am not the author of these report extracts .They appear in the Baltimore produced investment publication Money Morning .

 

also....notice how alot of the new leaders are from goldman sachs? Monti in Italy has connections with Goldman Sachs...even the leader in Greece came from the european central bank which has connections with Goldman Sachs...seems to me those banks you mentioned are trying to buy their way out of the mess they are in by putting puppets in charge!

 

Let 'em fail. They deserve to fail for mismanagement. The economic collapse is coming sooner or later. At least if we have it sooner, it will be somewhat less severe and allow recovery after a shorter period of time.

 

yup......the party was nice while it lasted but now its time for the hangover!

 

Putting on one side my personal views , you must understand that the implications of those four banks failing are on a par with Judgement Day .
Literally , the planet economy would be smashed to smithereens .We would fall back by at least 500 years and my guess is that disease would sweep the planet and devastate matters as we know them even further
The scenario would be exactly opposite to the one you think would occur .
If you feel happy with that type of scenario , so be it .
But be sure you know precisely what you think you are wishing for .

 

I dissagree.....sure there would be pain lasting a few years ( the hangover) but eventually we would bounce back!

 

Yeah, you hold on to that. We would be lucky if capitalism would still exist. world wide demonstrations, revolutions and war. starvation, joblessness and chaos. Not just for a few years. If we could, we should have executed all the bastards that did this to us, namely the financial institutions, but we can't, those jerks got the only key to the bus that's gonna drive us out of this mess, worse yet, they know it. I want to punch the wall every time I think about it.

 

all that you just talked about will happen in the USA yes ( just like in the USSR when it collapsed) but the rest of the globe will just suffer a recession

 

I don't know where you are from, but right now, the EU is teetering on the edge of a giant recession they might not be able to recover from. The United States is the largest consumer in the world, should our economy collapse the rest of the world goes into depression until we come out of it or a new system of economics is developed. You my not like it, but the world is still tied to the dollar. Is our economy weak right now? Is the dollar weak? Hell yes. But the last time we were "downgraded"by S&P where did everybody go? The US bond market. In a world of blind people, the one eyed man is king.

 

the US is a consumer that can no longer pay its bills. If the american consumer dissappears then I guess the chinese will need to allow the yuan to rise and so all of the sudden a billion chinese will become consumers!

 

as of now the Chinese have no intention of giving it's populace the power to expand and become the consumers the rest of the world takes for granted, they still hevily regulate their currency. As bad as the situation is in America, it is worse everywhere else that matters. Germany has hung it's hat on the Euro so it shares it's debt with the rest of Europe

 

I never said it ws going to be smooth sailing ahead, but I just think that china has the power to do the right thing and let the yuan float......now weather they do that or not is another story! As for the EU? I doubt that the euro will even be around in 5 years time!

 

These banks have been falling for the past 6 years. They are worthless stock IMO. Citi had a 20X reverse split in March of this year when their stock increased from about $4 a share to $40 per share. Now it has degraded more to around $30 per share. In SEP 2010 it was hovering around $2 a share. They're getting close to that mark again.

 

the government should of let Citi fail back in 2008!

 

If you know the history Tim Ghitner has with Citi, you would know why that did not happen. For Tim Blood is thicker than country.

 

I already know that alot of these politicians are ex-bankers if thats what you mean.....and I still say they should of let Citi fail along with AIG!

 

Listen you Guys , I get the impression that many of you have no real understanding of what " letting a bank go to the wall " actually means .
Remind yourself of the world chaos that resulted when comparatively small outfits like Lehman and Bear Stearns went under .
The whole system came within a hairs breath of full collapse and only the Fed printing imaginary money saved the day as Banks " secretly" took loans to re-capitalise as the markets disintegrated .

Now Banks as institutions are the holders of Sovereign State Debt .
So , as a simple example , when Greece defaulted , it was the Banks that made loans to the Greek Government that suffered and now carry the burden of Greek bankruptcy .
Greek banks were easily worst hit , but the biggest bank in Belgium --- for reasons only known to lunatic Belgian bankers --- had made enormous loans to Greece via bond purchases . The Belgian Bank had to be bailed out because it was technically bankrupt which meant that the country was almost in the same situation --- disease via contagion .
If Italy is effectively allowed to default , the effects on Germany and France , and the UK to a lesser extent , will be disastrous .Not the countries literally , but the respective banks which shoulder Sovereign debt .
Once you start playing games with the likes of Citi Group , Bank of America ( totally pot less) , J.P. Morgan , Goldman Sachs and others , the game is up . The system collapses globally via contagion .
We will drop back 500 years .
Have no illusions on this matter .

 

It's a good time to be an anarchist.

 

If the derivatives market collapses, all the currency floating in the world would not save the present economic system. That would be little more than pissing in a hurricane. The OP is right that such an event would utterly destroy the global economy, and the international system as a whole.

Whether you consider that a good thing or not depends on how invested you've become in the present economic system. How much property do you have? Would you be alright if you lost it? Are you flexible enough to find useful work when your current job collapses? Very basic questions.

 

On a positive note: the collapse of the capitalist system would be a tremendous opportunity for socialism to take root again. When the dust settles, there will be tremendous opportunities for people to reorganize society, and this time maybe we can do it right.

 

You are being a bit dramatic, I think. I would only be as bad as the great depression or either of the two world wars. But that is bad enough, I suppose.

But if one little land like Greece can bring the whole system down, then there is something very wrong with the system. Let fall what can not stand.

I think the key words here are "short term profit". That is all Goldman Sachs & Co care about. They don't even care if their own company goes belly up two years down the line as long as they get their million dollar bonus THIS year!

Basically Goldman Sachs infiltarated the US government and printed up money for themselves. That system does not work.

 

It would be a problem many times larger than the great depression.

Sure, but understand--it means getting completely wiped out from a financial standpoint. The folks in their 20s will manage, but the people who have to retire or live in retirement?

 

Its the price you pay for years of indiscretion.

People get hurt, its what happens. Its the consequence of allowing your government to regulate/control your economy.

 

Like I said, it's a good time to be an anarchist or socialist. Once the capitalists consume their own institutions of power, it leaves a great vacuum to fill.

 

All of those financial institutions are major players in government and central banks. The state won't let them fail, they'll bleed the citizenry dry to keep the corruption alive.