Derivatives

Casino Culture Creates Up To $1.5 Quadrillion In Outstanding Derivative Contracts

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Since the financial collapse of 2008, the still largely unregulated derivatives market has actually increased by over 20%. These dangerous OTC Derivatives contracts, which Warren Buffet has long called “Financial Weapons of Mass Destruction” are underlying the financial markets as potential time bombs.

Simply put, a “derivative” is not an investment.  When you purchase a stock, you are purchasing an ownership interest in a company.  When you purchase a bond, you are purchasing the debt of a company.  A derivative contract is different.  Derivatives are simply bets about what will or will not happen in the future.  The “Too Big To Fail Banks” have transformed Wall Street into the biggest casino in the history of the planet, and when things are running smoothly they usually make a whole lot of money at it.

Interest rate bets continue to be the dominant bet in the derivatives market.

 

The six US “too big to fail” banks recently disclosed exposure of $278 Trillion.  The six banks that I am referring to are JPMorgan Chase, Citibank, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo.

When you add up the assets of these six banks you only get $9.8 Trillion. These six banks have been able to amass derivative exposure almost 30 times their balance sheet assets.

With interests rates sitting in unchartered territory set for volatile for a move. The heads of the big banks know it is only a matter of time before a cascading crash event can be sparked by these greedy and reckless bets.

Recently, Jamie Dimon, CEO of JP Morgan Chase stated that “derivatives moved by enormous players and rapid computerized trades” were poised to be a catalyst of the next crisis.