Skip to content
Socio-Economics History Blog

Socio-Economics History Blog

  • About

Socio-Economics History Blog

Socio-Economics History Blog

The Looming Financial Derivative Crisis

April 23, 2020 by mosesman

  • The Looming Financial Derivative Crisis
    by Alasdair Macleod, https://www.goldmoney.com/
    The powerful forces of bank credit contraction are at the heart of a rapidly evolving financial crisis in global derivatives, whose gross value is over $600 trillion; an unimaginable sum. Central banks are on course to destroy their currencies through unlimited monetary expansion, lethal for bullion banks with fractionally reserved unallocated gold accounts, while being dramatically short of Comex futures.
    –
    This article explains the dynamics behind the current crisis in precious metal derivatives, and why it is the observable part of a wider derivative catastrophe that is caught in the tension between contracting bank credit and infinite monetary inflation.
    –

    Introduction
    One of the scares at the time of the Lehman crisis was that insolvent counterparties risked collapsing the whole over-the-counter derivative complex. It was for this reason that AIG, a non-bank originator of many derivative contracts, had to be bailed out by the Fed. By a mixture of good judgement and fortune a derivative crisis was averted, and by consolidating some of the outstanding positions, the gross value of OTC derivatives was subsequently reduced.
    –
    According to the Bank for International Settlements, in mid-June last year all global OTC contracts outstanding were still unimaginably large at $640 trillion, a massive sum in anyone’s book. It is unlikely to have changed much by today. But in bank balance sheets only a net figure is usually shown, and you have to search the notes to financial statements to find evidence of gross exposure. It is the gross that matters, because each contract bears counterparty risk, sometimes involving several parties, and derivative payment failures could make the payment failures now evident in disrupted industrial supply chains look like small beer.
    –
    Deutsche Bank’s 2019 balance sheet gives us an excellent example of how they are accounted for in commercial banks. It conceals derivative exposure under the headings “Trading assets” and “Trading liabilities” on the balance sheet. You have to go into the notes to discover that under Trading assets, derivative financial instruments total €80.848bn, and under Trading liabilities, derivative financial instruments total €81.910bn, a difference of €1.062bn This is relatively trivial for a bank with a balance sheet of €777bn.
    –
    But wait, there is another table that breaks derivative exposure down even further into categories, and it turns out the earlier figures are consolidated totals. The true total of OTC derivatives and exchange traded derivatives to which the bank is exposed is €37.121 trillion. That is nearly thirty-five thousand times the €1.062bn netted difference in the balance sheet. And when you bear in mind that valuing OTC derivatives is somewhat subjective, or as the cynics say, mark to myth, it invalidates the valuation exercise.
    –
    Clearly, by taking the mildest of a positive approach to derivatives held as assets, and a slightly more conservative approach to valuing derivatives on the liabilities side, that 35,000:1 leverage at the balance sheet level can make an enormous difference.
    –
    read more.

end

Post navigation

Previous Post:

If New Data Suggesting Covid-19 No More Lethal Than FLU is Correct, Should the World REVERSE Its Lockdown Strategy?

Next Post:

Flashback 2019: ID2020 And Partners Launch Program to Provide Digital ID with Vaccines

Pages

  • About

Recent Posts

  • Biden Admin Announces Labeling Trump Supporters Domestic Terrorists
  • Will Biden Complete The Construction Of The New World Order?
  • The Purge (of Christians, Conservatives, Libertarians) Is Here: Tucker Carlson and Glen Greenwald Respond
  • Democrat NGO’s To Direct Military / CIA & FBI In Purge of Conservatives, Christians, Libertarians …
  • The Empire Strikes Back: War For Humanity Enters Final Phase FULL SHOW 1-22-21
  • Persecution for U.S. Christians Could Come Quicker Than You Think
  • Tucker Obtains ‘Shocking’ Internal Email Sent to ICE Officers
  • IMF Urges Govts to “Spend as Much as You Can” | Alasdair Macleod
  • Biden Will Extinguish The Dollar
  • Next Leg Higher Could Take Silver to $50
  • Flashback: Pastor Robert Jeffress Warns Lou Dobbs ‘The Left’ Will ‘Bring Out the Guillotines’ If Trump Loses Reelection
  • GREENWALD: The New Domestic War on Terror is Coming!
  • ‘Death Delivered To The Front Door’ Being Rolled Out In America – Globalist Stooge Joe Biden Again Warns Of ‘A Dark Winter’, Deep State Code Words For A Bio-Warfare Attack Upon America?
  • Antifa Riots on New Year’s Chanting ‘We Got The Guillotine’!
  • “We Want Revenge”: Antifa Anarchists Activate After Biden Inaugurated
  • LET THERE BE BLOOD: Biden And Fauci Team Up To Revoke Trump Policy Protecting The Unborn To Create Massive International US Taxpayer-Funded Abortion Scheme
  • Tucker: None of Biden’s Actions Help Law Abiding Americans
  • Keiser Report | A Very Large Stimulus Package | E1648
  • Silver Price Plummets Because “COVID Is Raging In China”?!
  • DC Setting The Stage For Permanent Martial Law And A War On Patriots

Archives

  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011

Categories

  • Disaster
  • Economics
  • Endtimes
  • Geo-Politics
  • History
  • Medicine & Health
  • Satire
  • Science & Technology
  • Social Trends
  • Uncategorized

Meta

  • Log in
  • Entries RSS
  • Comments RSS
  • WordPress.org
April 2020
M T W T F S S
« Mar   May »
 12345
6789101112
13141516171819
20212223242526
27282930  
© 2021 Socio-Economics History Blog | WordPress Theme by Superbthemes