fizzy comment: I dunno what I think of this except it seems possible. You need to understand that our financial system post Bretton Woods was thoroughly cooked by the time of the Plaza Accord. The 'hot swap' which occurred in 1984 was to our current system: a Rube Goldberg contraption of computer networks, derivatives, and the US borrowing vast sums of putative capital from 3rd world banana nations to fund our switch from the world's biggest creditor to the world's biggest debtor. This currency system, the Plaza accord system, is now over-due to collapse. I do not think there will be another seamless hot swap. This time I think it is more likely to be 12.0 or higher on the Richter Scale (I think that makes it at least 1000 times bigger than the recent Japanese earthquake. So...this all seems possible. The US government is not going to easily accept extinction of life as we know it -- life as a super power. The US government WOULD give JP Morgan a pass rather than face hard reality.
Gold and Interest rates doom
"People never believe in volcanoes until the lava actually overtakes them." ~ George Santayana
Do your eyes glaze over when really big number are presented? Do you fail, does you mind reject derivatives, do you skip derivatives as just another big word? Rich, consevative Orange County in Southern California went bankrupt over this same stuff.
The big money is going to kill the Dollar when interest rates rise forcing the failure of interest focused derivatives counterparties ... then the hot lava will burn the unwary. ... my prediction is rates will rise in 2014 and/or beyond when Republican imposed austerity destroys what is left of the average American's 70% consumer driven economy just like Greece. ... this below piece repeats big numbers, derivatives: "....Derivatives: A Capital Markets Gong Show For Whom The Bell Tolls..."
"...The Office of the Comptroller of the Currency [OCC] tells us, in the Executive Summary of the Q1/11 Report that derivative contracts remain concentrated in interest rate products, which comprise 82% of total derivative notional values...Historically it is VERY WELL DOCUMENTED that Central Banks the world over have illustrated a large propensity to hide / veil / obfuscate all their activities relating to precious metals and specifically gold. Note the disparity between the transparency offered by the OCC with their Commercial Bank reportage versus the Holding Company data with falls under the purview of the Federal Reserve. This amounts to 80 Trillion worth of derivatives that the public knows “sweet nothing” about."
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Derivatives: A Capital Markets Gong Show For Whom The Bell Tolls
"... Accordingly, it sure is a good thing that the world’s biggest derivatives player - J.P. Morgan - has “seemingly” NEVER, EVER made a bet even “1 % wrong” with their 80 Trillion derivatives book. The Morgue has a Market Cap of roughly $180 billion. A wrong bet of a mere 1% on their ‘book’ would translate to a loss of $800 billion dollars eviscerating their entire capital base more than four times over. The knock on effect from such an event would trigger multiple tsunamis reverberating through the global financial system. Sounds absurd, but it’s pure math.
Either J.P. Morgan NEVER makes a mistake or they get a pass if / when they do make a mistake. Back in early 2006, Business Week reported,
President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006,
What that means folks, is: J.P. Morgan’s derivatives book constitutes national and international security and they along with other large derivatives player are NECESSARILY excused from wrong way bets. The obscenely large derivatives books of J.P. Morgan and other select money center banks are being used to execute U.S. monetary policy and to achieve other arbitrary financial market outcomes. This has been occurring since at least the mid 1990’s and severely ramped-up in the mid 2000’s.
Additionally, what can be said for J.P. Morgan can also be said for the likes of B of A, Citibank, Goldman Sachs – all with derivatives books [currently] ranging from 44+ to 79+ Trillion in size. Take note of the TOTAL derivatives for Commercial Banks at 243 Trillion:
TABLE 1 excerpted from: OCC Quarterly Derivatives Report Q1/11
Commercial Banks Vs. Bank Holding Companies
The Office of the Comptroller of the Currency [OCC] tells us, in the Executive Summary of the Q1/11 Report that derivative contracts remain concentrated in interest rate products, which comprise 82% of total derivative notional values. Credit derivatives, which represent 6.1% of total derivatives notionals, increased 5.3% to $14.9 trillion. It is the settlement of these interest rate derivatives – specifically int. rate swaps of duration between 3 and 10 years – that creates artificial scarcity of physical U.S. government bonds.
The OCC’s quarterly derivatives report is published three months in arrears and typically runs about 30 – 35 pages in length. All but one page of this reporting deals with data on the Commercial Bank level. Commercial Bank reporting falls under the purview of the Office of the Comptroller of the Currency. It’s in the Commercial Bank reportage ONLY where we get a glimpse of bank activity in precious metals:
excerpted from: OCC Quarterly Derivatives Report Q1/11
ONLY one page of the quarterly derivatives report [table 2] gives us a high level view of derivatives at the Holding Company Level. Bank Holding Com pany reporting falls under the purview of the Federal Reserve and DOES NOT INCLUDE any breakout or reveal on precious metals derivatives holdings. Take note how – at the Holding Company Level, Morgan Stanley’s Derivatives book swells to over 51 TRILLION – vaulting them from a rather insignificant 8th place on the Commercial Bank list into 4th place on the Holding Company list below. :
TABLE 2 excerpted from: OCC Quarterly Derivatives Report Q1/11
Historically it is VERY WELL DOCUMENTED that Central Banks the world over have illustrated a large propensity to hide / veil / obfuscate all their activities relating to precious metals and specifically gold. Note the disparity between the transparency offered by the OCC with their Commercial Bank reportage versus the Holding Company data with falls under the purview of the Federal Reserve. This amounts to 80 Trillion worth of derivatives that the public knows “sweet nothing” about.
Remember folks, it was none other than former Federal Reserve Vice Chairman Alan Blinder – while appearing on the Nightly Business Report back in 1994 – issued these prescient words,
“the last duty of a central banker is to tell the public the truth”
By comparing Total Derivatives in TABLE 1 [Commercial] versus TABLE 2 [Holding Co.] we can identify that Morgan Stanley’s derivatives book stands as a 50 TRILLION BLACK HOLE where reporting of precious metals are concerned; Goldman’s 5+ TRILLION, B of A’s 20 TRILLION, J.P. Morgue’s about 1 TRILLION.
Now everyone should appreciate the fact that Morgan Stanley’s “book” grew from 42.1 Trillion at Dec. 31/10 to 51.2 Trillion at Mar. 31/11 – THAT’S an increase of 9.1 TRILLION in three months at an institution with a market capitalization of 35 billion. Even if you’re asleep and have your head buried in the sand, you’ve got to admit that 9.1 TRILLION ramp in business in 3 months for a company with a 35 billion market cap is quite a feat, eh? Remember folks, interest rate derivates – BY THEIR VERY NATURE, DO HAVE 2-WAY CREDIT / COUNTERPARTY RISK.
The feat performed by Morgan Stanley, outlined above, becomes even more unbelievable when you stop and consider that – according to the OCC – there are virtually NO DECLARED or IDENTIFIABLE END USERS [counterparties] for these products:
excerpted from: OCC Quarterly Derivatives Report Q1/11
Now we must ask who Morgan Stanley did their impressive 9.1 TRILLION trade in 3 months with? Just because they remain anonymous doesn’t mean they don’t exist – but they are certainly known to the Federal Reserve because the Fed has purview, as regulator, over Bank Holding Companies. So, by extension – the Fed is comfortable [from a credit standpoint] with “whoever it is” that Morgan Stanley is doing this mind boggling business with. What we can say about the nature of this business is this: in the absence of identifiable end users [counterparties], this trade creates artificial demand for U.S. Government bonds.
So who would Morgan Stanley [and the Fed by extension] accept as a secretive counterparty on this scale - in credit sensitive transactions that serve to create artificial demand for U.S. government securities? Embodied in the answer to this question IS THE REASON why the world’s largest bond fund – Bill Gross/ PIMCO – got it ALL [counter-intuitively] WRONG on interest rates. It also happens to be the EXACT same reason why Amaranth got it ALL [counter-intuitively] WRONG with Natural Gas back in 2006.
How many ways can you say Exchange Stabilization Fund? It’s the Exchange Stabilization Fund acting through the New York Fed – utilizing agents J.P. Morgan, Citibank, B of A, Goldman Sachs and Morgan Stanley as proxies to implement imperialist U.S. monetary policy.
...more...
http://www.marketoracle.co.uk/Article29005.html
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I have come to realize that men are not born to be free. Liberty is a need felt by a small class of people whom nature has endowed with nobler minds than the mass of men. -Napoleon
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