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Thread: $681 trillion in derivatives

  1. #1

    $681 trillion in derivatives

    [url]http://www.bloomberg.com/apps/news?pid=20601087&sid=ad71potU0EbM&refer=home[/url]

    Folks...say hello to the financial instrument that will ruin it for the Cinderella US economy and send the US dollar into a hyperinflationary state, putting us on the path for a replacement North American currency called the Amero: the culprit is "over-the-counter derivative". Warren Buffet has called derivatives "financial weapons of mass destruction." $681 trillion...there's probably no more than $10 trillion of real money in the entire world. The money changers' greed has reached unprecedented levels. These deriviatives are 2 party agreements, "sidebets" if you will, with no regulations or clearing house.

    Can you imagine what will happen when the US dollar no longer is accepted around the world and our international capital flows decrease because of higher interest rates due to a depreciated dollar? How many of these derivatives will turn sour forcing a redistribution of money the likes of which the world has never seen? It will force the Fed to hyperinflate the currency, giving the globalists the opportunity to foist a North American Union/common currency like Europe upon us.

    That's what gonna happen in the next 4 years.

    Prepare yourself. If you're reading this you can't say you weren't warned. Is it really hard to just set aside some idle cash and buy gold coins? By 2011, they will be worth double what they are today, while the cash will be worth only 60% of its present value. Your cash savings are about to be eroded. I hope I am wrong but it looks like the cinderella American economy is about to turn into the Weimar Republic's economy...
    Last edited by JetsCrazey; 12-10-2007 at 09:51 PM.

  2. #2
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    [QUOTE=JetsCrazey;2257588][url]http://www.bloomberg.com/apps/news?pid=20601087&sid=ad71potU0EbM&refer=home[/url]

    Folks...say hello to the financial instrument that will ruin it for the Cinderella US economy and send the US dollar into a hyperinflationary state, putting us on the path for a replacement North American currency called the Amero: the culprit is "over-the-counter derivative". Warren Buffet has called derivatives "financial weapons of mass destruction." $681 trillion...there's probably no more than $10 trillion of real money in the entire world. The money changers' greed has reached unprecedented levels. These deriviatives are 2 party agreements, "sidebets" if you will, with no regulations or clearing house.

    Can you imagine what will happen when the US dollar no longer is accepted around the world and our international capital flows decrease because of higher interest rates due to a depreciated dollar? How many of these derivatives will turn sour forcing a redistribution of money the likes of which the world has never seen? It will force the Fed to hyperinflate the currency, giving the globalists the opportunity to foist a North American Union/common currency like Europe upon us.

    That's what gonna happen in the next 4 years.

    Prepare yourself. If you're reading this you can't say you weren't warned. Is it really hard to just set aside some idle cash and buy gold coins? By 2011, they will be worth double what they are today. Your cash savings are about to be eroded. I hope I am wrong but it looks like the cinderella American economy is about to turn into the Weimar Republic's economy...[/QUOTE]

    Wow. Then we're really going to sock it to the Chinese then with all that dollar-denominated crap they've been buying here, right? They hold a significant amount of U.S. debt.

    Diversity is the key. With a weak dollar you should bet on the best companies in the world, which are mostly right here in the U.S. and who sell overseas. They've been reaping great FX gains on their overseas revenue. The big multi-nationals have been a pretty good place for the past couple of years.

  3. #3
    I would really appreciate it if people who know a thing or two about these economic matters would chime in. It would really be beneficial if the tact taken and opinions given had nothing to do with politics and everything to do with economics. Thx.

  4. #4
    This seems like something that is very important, but I am not up to understanding all these big economic terms yet, can someone please explain it in lamens terms

  5. #5
    Christ, this is the **** my macro final is on tomorrow... And I'm ****ed

  6. #6
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    [QUOTE=JCnflies;2257734]I would really appreciate it if people who know a thing or two about these economic matters would chime in. It would really be beneficial if the tact taken and opinions given had nothing to do with politics and everything to do with economics. Thx.[/QUOTE]

    I'd probably find a source other than a NYJ message board for quality, informed analysis of topics like this.

  7. #7
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    [B][U][SIZE="7"][COLOR="Red"][FONT="Arial Black"]DOOM!!!![/FONT][/COLOR][/SIZE][/U][/B]

  8. #8
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    [QUOTE=JetsCrazey;2257588][url]http://www.bloomberg.com/apps/news?pid=20601087&sid=ad71potU0EbM&refer=home[/url]

    Folks...say hello to the financial instrument that will ruin it for the Cinderella US economy and send the US dollar into a hyperinflationary state, putting us on the path for a replacement North American currency called the Amero: the culprit is "over-the-counter derivative". Warren Buffet has called derivatives "financial weapons of mass destruction." $681 trillion...there's probably no more than $10 trillion of real money in the entire world. The money changers' greed has reached unprecedented levels. These deriviatives are 2 party agreements, "sidebets" if you will, with no regulations or clearing house.

    Can you imagine what will happen when the US dollar no longer is accepted around the world and our international capital flows decrease because of higher interest rates due to a depreciated dollar? How many of these derivatives will turn sour forcing a redistribution of money the likes of which the world has never seen? It will force the Fed to hyperinflate the currency, giving the globalists the opportunity to foist a North American Union/common currency like Europe upon us.

    That's what gonna happen in the next 4 years.

    Prepare yourself. If you're reading this you can't say you weren't warned. Is it really hard to just set aside some idle cash and buy gold coins? By 2011, they will be worth double what they are today, while the cash will be worth only 60% of its present value. Your cash savings are about to be eroded. I hope I am wrong but it looks like the cinderella American economy is about to turn into the Weimar Republic's economy...[/QUOTE]


    Are you kidding me - No regulation and no clearing houses? Tell that to the people at the CME, CFTC, OCC, BOTCC, SEC, CDCC, and other DCOs.

    Do you even know what dervivatives are, what they are used for? Do you know what a future is, an option, a currency forward, a swap or the different types of these things...like ABX, CDX, LCDX, CMBX and how they these innovations have improved things in many ways. Do you have any idea whatsoever what you are talking about, or do you simply post things from other websites and try to pass them off as your own thoughts?

    If we have higher interest rates, people will want to invest here to earn that virtually risk-free return. Are you a moron? Do you own stock in a gold company or something?

  9. #9
    [QUOTE=jets5ever;2257967]Are you kidding me - No regulation and no clearing houses? Tell that to the people at the CME, CFTC, OCC, BOTCC, SEC, CDCC, and other DCOs.

    Do you even know what dervivatives are, what they are used for? Do you know what a future is, an option, a currency forward, a swap or the different types of these things...like ABX, CDX, LCDX, CMBX and how they these innovations have improved things in many ways. Do you have any idea whatsoever what you are talking about, or do you simply post things from other websites and try to pass them off as your own thoughts?

    If we have higher interest rates, people will want to invest here to earn that virtually risk-free return. Are you a moron? Do you own stock in a gold company or something?[/QUOTE]

    If you think I'm crazy then fine, that's your choice. Just know that you've received fair warning if this potential disaster really does play out.

  10. #10
    [QUOTE=jets5ever;2257967]
    Do you even know what dervivatives are, what they are used for?

    Do you have any idea whatsoever what you are talking about, or do you simply post things from other websites and try to pass them off as your own thoughts?[/QUOTE]


    I don't usually agree whole heartedly with 5ever but this is one of those times.

    don't forget these 'sidebets' are a zero sum game - someone wins and someone loses. it's all above board and highly regulated.

  11. #11
    You are right in saying that they are a zero sum game, but that doesn't stop an entity from taking on more derivative obligations than real assets they have on their balance sheet. If events play out unfavorable, they are screwed. All the major Wall Street banks have flooded their balance sheets with level 3 assets (derivatives) for which there is no market, and thus no real "mark-to-market" value.

    These are highly profitable instruments, and the Hedge fund world is not a rational one. It's a world driven today by black boxes and quants who use machines to chase profits with no regards for anything but the prospect of more profit. These guys aren't thinking about anything other than their year-end bonuses, and every additional derivative means more profit with no real basis of wealth.

    And no, derivatives are not regulated as to what the terms, outcomes, or risks may be. There is a reason Warren Buffet called these instruments "financial weapons of mass destruction" they are just that. The markets are running wild in experiment with these instruments. Congressman Henry Gonzalez chaired the House Banking and Currency Committee from 1989-95 and he warned the Fed that if the derivatives market got out of hand it would eventually cause a disaster, and his warnings have gone unheeded by a banking community that worships greed.

    The truth is, nobody knows what kind of chain reaction a downturn will cause, and it looks like double digit inflation may be the only way for the Fed to avoid such a scenario. The hedge fund world is a bunch of addicts, and artificial credit is their drug. Economic law dictates that at some point, the punch bowl goes away.
    Last edited by JetsCrazey; 12-11-2007 at 11:31 AM.

  12. #12
    [QUOTE=JetsCrazey;2258167]You are right in saying that they are a zero sum game, but that doesn't stop an entity from taking on more derivative obligations than real moeny they have on their balance sheet. If events play out unfavorable, they are screwed.[/QUOTE]

    well that sucks for that organization but the dollar is fine in this situation

    put it another way you might read about Bank of America or citigroup laying off workers, that's because they are getting their butts whupped by morgan or lehman or goldman, all of whom can't hire enough qualifed people.

    another example harvard's endowment has grown to over 10 billion because of these derivatives but other schools have lost it all trying to do the same thing - survival of the fittest

    these derivatives actually beneficial to the economy, because it allows institutions to increase their investment returns, and in turn spend more on their operations.

    so back to the earlier example if Harvard wants to build a new dorm or class room building, that money comes from the endowment, and stimulates the economy. if they had it in a savings account yielding 3% maybe they can't expand as well.

  13. #13
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    [QUOTE=JetsCrazey;2258030]If you think I'm crazy then fine, that's your choice. Just know that you've received fair warning if this potential disaster really does play out.[/QUOTE]

    fair warning?

    Beware of an asteroid, tidal wave, hurricane and nuclear war. Now, IF ANY OF THOSE THINGS HAPPEN, don't come crying to me. I've warned you all!

  14. #14
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    [QUOTE=JetsCrazey;2258030]If you think I'm crazy then fine...[/QUOTE]

    Nah, I don't think you're crazy. I think you're craz[B]e[/B]y! :P

    By the way, the dollar has bottomed.

  15. #15
    [QUOTE=jetstream23;2258182]fair warning?

    Beware of an asteroid, tidal wave, hurricane and nuclear war. Now, IF ANY OF THOSE THINGS HAPPEN, don't come crying to me. I've warned you all![/QUOTE]

    My warning is much more specific than that:
    Beware of your cash savings losing at least 40% of its value in the next 4 years.
    Beware of the US dollar index going on a freefall to .52 ish once the TIC report goes negative (bound to happen soon)

  16. #16
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    [QUOTE=JetsCrazey;2258167]You are right in saying that they are a zero sum game, but that doesn't stop an entity from taking on more derivative obligations than real assets they have on their balance sheet. If events play out unfavorable, they are screwed. All the major Wall Street banks have flooded their balance sheets with level 3 assets (derivatives) for which there is no market, and thus no real "mark-to-market" value.

    These are highly profitable instruments, and the Hedge fund world is not a rational one. It's a world driven today by black boxes and quants who use machines to chase profits with no regards for anything but the prospect of more profit. These guys aren't thinking about anything other than their year-end bonuses, and every additional derivative means more profit with no real basis of wealth.

    And no, derivatives are not regulated as to what the terms, outcomes, or risks may be. There is a reason Warren Buffet called these instruments "financial weapons of mass destruction" they are just that. The markets are running wild in experiment with these instruments. Congressman Henry Gonzalez chaired the House Banking and Currency Committee from 1989-95 and he warned the Fed that if the derivatives market got out of hand it would eventually cause a disaster, and his warnings have gone unheeded by a banking community that worships greed.

    The truth is, nobody knows what kind of chain reaction a downturn will cause, and it looks like double digit inflation may be the only way for the Fed to avoid such a scenario. The hedge fund world is a bunch of addicts, and artificial credit is their drug. Economic law dictates that at some point, the punch bowl goes away.[/QUOTE]

    There is most certainly a market for these instruments. I work for an asset manager as an analyst and we are a quant shop. We manage largely pension money for large institutions, these people have present and future liabilities and most CERTAINLY have to worry about things other than year-end bonuses and they cannot BY LAW assume more risk than a certain amount in their quest to generate returns that can satisfy their unending and increasing cashflow requirements...and we have strict limitations we have to adhere to in terms of exposure, VAR and tracking error relative to many equity indicies like those of S&P, MSCI, FTSE and JPMorgan, for clients..we have information ratio bands that we have to maintain - we cannot just make crazy bets that we want to, with a complete disregard for contracted investment guidelines..are you crazy? We can't just put all of Calpers' pension money in a derivivative instrument and lever the cr*p out of things, even if we wanted to, more than what we are allowed to do, and insitutional investors, primarily public and private pension schemes, are increasingly the market movers this day and age, along with private equity firms. We have strict compliance programs that we have to adhere to in our capacity as a fiduciary to these assets and plan sponsors. Your Doomsday descriptions are nowhere near the reality for institutional investment managers like us, who manage hundreds of billions in client assets, in equity, fixed income, balanced and hedged strategies, which all include derivative exposure and bets.

    You have no idea what you are talking about - that much is obvious.
    Last edited by jets5ever; 12-11-2007 at 11:43 AM.

  17. #17
    [QUOTE=bitonti;2258177]well that sucks for that organization but the dollar is fine in this situation

    put it another way you might read about Bank of America or citigroup laying off workers, that's because they are getting their butts whupped by morgan or lehman or goldman, all of whom can't hire enough qualifed people.

    another example harvard's endowment has grown to over 10 billion because of these derivatives but other schools have lost it all trying to do the same thing - survival of the fittest

    these derivatives actually beneficial to the economy, because it allows institutions to increase their investment returns, and in turn spend more on their operations.

    so back to the earlier example if Harvard wants to build a new dorm or class room building, that money comes from the endowment, and stimulates the economy. if they had it in a savings account yielding 3% maybe they can't expand as well.[/QUOTE]

    Too bad we're dealing with Wall Street banks and hedge funds, and not universities.
    The Fed will bail these guys out first like they have in every other financial crises the Fed has caused. "Liquidity injection" is a euphemism for "bailout by way to dollar devaluation". They will bail the bankers out by confiscating my and your wealth via inflation.

  18. #18
    [QUOTE=jets5ever;2258197]I work for an asset manager as an analyst and we are a quant shop. We manage largely pension money for large institutions, these people most CERTAINLY have to worry about things other than year-end bonuses...we have strict limitations we have to adhere to in terms of exposure, VAR and tracking error relative to many equity indicies like those of S&P, MSCI, FTSE and JPMorgan. We can't just put all of Calpers' pension money in a dervivative instrument and lever the cr*p out of things, even if we wanted to. We have strict compliance programs that we have to adhere to in our capacity as a fiduciary to these assets and plan sponsors.
    [/QUOTE]

    Can you say the same for all these hedge funds and wall street banks knowlingly pushed fraudulent mortgages?
    Can you say the same for those same parties that milked the carry trade for all it was worth, collateralizing all sorts of risky debt thanks to artificially low interest rates?
    Are you certain that a worst 5% outcome won't happen? The VAR models didn't plan for that, and who knows how many of these 10-12 person hedge fund shops that deal in the billions actually use a responsible VAR...Not to mention that these VAR models can't factor in the increased volatility that we're seeing in this day and age.

    My point is exactly that...WE DON'T KNOW

    Do you seriously not expect a significant downturn from the historic bull market for pretty much every asset class that we've seen?
    We're at a point where a true recession would kill the financial world. The Fed will have no other choice than to kill the dollar to save the markets.
    Last edited by JetsCrazey; 12-11-2007 at 11:49 AM.

  19. #19
    [QUOTE=JetsCrazey;2258199]Too bad we're dealing with Wall Street banks and hedge funds, and not universities.[/QUOTE]

    a good chunk of Harvard's endowment is managed by a hedge fund comprised of alumni

  20. #20
    Many state-sponsored pensions are actually going to be introuble because of this. In Florida one pension fund actually closed up shop.

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