The Coming Economic Collapse
Jun 20, 2012 12:09:37 GMT -5
Post by Michael Downing on Jun 20, 2012 12:09:37 GMT -5
I was doing some reading on the economic situation of the big banks and came across this article which is a few weeks old but good info. I doubt that there are any of us here who do not believe that an economic collapse is eminent so the question is What more can we do to survive the economic tsunami that is coming?
The 2 Billion Dollar Loss By JP Morgan Is Just A Preview Of The Coming Collapse Of The Derivatives Market
When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned. But the truth is that this is just the beginning. This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market. When most Americans think of Wall Street, they think of a bunch of stuffy bankers trading stocks and bonds. But over the past couple of decades it has evolved into much more than that. Today, Wall Street is the biggest casino in the entire world. When the "too big to fail" banks make good bets, they can make a lot of money. When they make bad bets, they can lose a lot of money, and that is exactly what just happened to JP Morgan. Their Chief Investment Office made a series of trades which turned out horribly, and it resulted in a loss of over 2 billion dollars over the past 40 days. But 2 billion dollars is small potatoes compared to the vast size of the global derivatives market. It has been estimated that the the notional value of all the derivatives in the world is somewhere between 600 trillion dollars and 1.5 quadrillion dollars. Nobody really knows the real amount, but when this derivatives bubble finally bursts there is not going to be nearly enough money on the entire planet to fix things.
Sadly, a lot of mainstream news reports are not even using the word "derivatives" when they discuss what just happened at JP Morgan. This morning I listened carefully as one reporter described the 2 billion dollar loss as simply a "bad bet".
And perhaps that is easier for the American people to understand. JP Morgan made a series of really bad bets and during a conference call last night CEO Jamie Dimon admitted that the strategy was "flawed, complex, poorly reviewed, poorly executed and poorly monitored".
The funny thing is that JP Morgan is considered to be much more "risk averse" than most other major Wall Street financial institutions are.
So if this kind of stuff is happening at JP Morgan, then what in the world is going on at some of these other places?
That is a really good question...
We never learned one of the basic lessons that we should have learned from the financial crisis of 2008.
Wall Street bankers take huge risks because the risk/reward ratio is all messed up.
If the bankers make huge bets and they win, then they win big.
If the bankers make huge bets and they lose, then the federal government uses taxpayer money to clean up the mess.
Under those kind of conditions, why not bet the farm?
Sadly, most Americans do not even know what derivatives are.
Most Americans have no idea that we are rapidly approaching a horrific derivatives crisis that is going to make 2008 look like a Sunday picnic.
According to the Comptroller of the Currency, the "too big to fail" banks have exposure to derivatives that is absolutely mind blowing. Just check out the following numbers from an official U.S. government report....
JPMorgan Chase - $70.1 Trillion
Citibank - $52.1 Trillion
Bank of America - $50.1 Trillion
Goldman Sachs - $44.2 Trillion
So a 2 billion dollar loss for JP Morgan is nothing compared to their total exposure of over 70 trillion dollars.
Overall, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. That is approximately 3 times the size of the entire global economy.
It is hard for the average person on the street to begin to comprehend how immense this derivatives bubble is.
So let's not make too much out of this 2 billion dollar loss by JP Morgan.
This is just chicken feed.
This is just a preview of coming attractions.
Soon enough the real problems with derivatives will begin, and when that happens it will shake the entire global financial system to the core.
theeconomiccollapseblog.com/archives/the-2-billion-dollar-loss-by-jpmorgan-is-just-a-preview-of-the-coming-collapse-of-the-derivatives-market/comment-page-2#comments
The 2 Billion Dollar Loss By JP Morgan Is Just A Preview Of The Coming Collapse Of The Derivatives Market
When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned. But the truth is that this is just the beginning. This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market. When most Americans think of Wall Street, they think of a bunch of stuffy bankers trading stocks and bonds. But over the past couple of decades it has evolved into much more than that. Today, Wall Street is the biggest casino in the entire world. When the "too big to fail" banks make good bets, they can make a lot of money. When they make bad bets, they can lose a lot of money, and that is exactly what just happened to JP Morgan. Their Chief Investment Office made a series of trades which turned out horribly, and it resulted in a loss of over 2 billion dollars over the past 40 days. But 2 billion dollars is small potatoes compared to the vast size of the global derivatives market. It has been estimated that the the notional value of all the derivatives in the world is somewhere between 600 trillion dollars and 1.5 quadrillion dollars. Nobody really knows the real amount, but when this derivatives bubble finally bursts there is not going to be nearly enough money on the entire planet to fix things.
Sadly, a lot of mainstream news reports are not even using the word "derivatives" when they discuss what just happened at JP Morgan. This morning I listened carefully as one reporter described the 2 billion dollar loss as simply a "bad bet".
And perhaps that is easier for the American people to understand. JP Morgan made a series of really bad bets and during a conference call last night CEO Jamie Dimon admitted that the strategy was "flawed, complex, poorly reviewed, poorly executed and poorly monitored".
The funny thing is that JP Morgan is considered to be much more "risk averse" than most other major Wall Street financial institutions are.
So if this kind of stuff is happening at JP Morgan, then what in the world is going on at some of these other places?
That is a really good question...
We never learned one of the basic lessons that we should have learned from the financial crisis of 2008.
Wall Street bankers take huge risks because the risk/reward ratio is all messed up.
If the bankers make huge bets and they win, then they win big.
If the bankers make huge bets and they lose, then the federal government uses taxpayer money to clean up the mess.
Under those kind of conditions, why not bet the farm?
Sadly, most Americans do not even know what derivatives are.
Most Americans have no idea that we are rapidly approaching a horrific derivatives crisis that is going to make 2008 look like a Sunday picnic.
According to the Comptroller of the Currency, the "too big to fail" banks have exposure to derivatives that is absolutely mind blowing. Just check out the following numbers from an official U.S. government report....
JPMorgan Chase - $70.1 Trillion
Citibank - $52.1 Trillion
Bank of America - $50.1 Trillion
Goldman Sachs - $44.2 Trillion
So a 2 billion dollar loss for JP Morgan is nothing compared to their total exposure of over 70 trillion dollars.
Overall, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. That is approximately 3 times the size of the entire global economy.
It is hard for the average person on the street to begin to comprehend how immense this derivatives bubble is.
So let's not make too much out of this 2 billion dollar loss by JP Morgan.
This is just chicken feed.
This is just a preview of coming attractions.
Soon enough the real problems with derivatives will begin, and when that happens it will shake the entire global financial system to the core.
theeconomiccollapseblog.com/archives/the-2-billion-dollar-loss-by-jpmorgan-is-just-a-preview-of-the-coming-collapse-of-the-derivatives-market/comment-page-2#comments