AMonger
Veteran Expediter
I don't know enough about the world of finance to know whether this is accurate or not. Opinions?
There's no way in hell we're
making it to Nov 2012
Here is an intellectually
honest trader who was
interviewed this morning by
the BBC. As much as you
may not want to believe it,
what this guy says is correct .
This iteration of human
civilization is approaching an
end.
Here is a piece from
ZeroHedge.com
that hopefully will make you
all understand, once and for
all, that this ain't the 1930's,
and that there is absolutely no
way in hell that this Republic,
or any other country, is going
to make it to November 2012.
HERE IT IS.
Summary: The five largest
banks in the U.S. (JP Morgan
Chase, Citibank, Bank of
America, Goldman Sachs and
HSBC) are carrying $238
TRILLION dollars in derivative
exposure. JP Morgan alone is
carrying $78 TRILLION in
derivative exposure BY ITSELF.
Okay, what the hell is
derivative exposure? What this
is referring to are over-the-
counter non-exchange traded
forward delivery (or "futures")
contracts of various kinds. I
am a futures broker, but I
only execute futures contracts
on the futures exchanges,
namely the Chicago Mercantile
Exchange and the New York
Mercantile Exchange.
About ten years ago a new
"novelty" emerged in the
futures business - the so-called
"over-the-counter " contracts.
There was a kid in the office I
worked in who got wind of
this and had all kinds of stars
in his eyes about making a
killing off of these "OTC"
contracts because the brokers'
commissions were not a flat
fee but a percent of the
contract value. Here's the
problem with OTC contracts:
there is no exchange standing
between the buyer and seller
as a guarantor.
In my business, when a
customer executes a trade on
a futures or options contract,
it makes no difference who
the other guy is on the other
side of the trade, be it
executed electronically or in
the pit. None of us have to
worry for a second about the
counterparty on our
executions because the
EXCHANGE ITSELF stands
between ALL transactions as
the ultimate guarantor. The
exchange then enforces the
financial requirement rules
with the Clearing Houses, the
Clearing Houses enforce the
financial requirement rules
with the brokers, and the
brokers enforce the financial
requirement rules with the
customers. That is the chain of
financial responsibility. So,
even if a customer bugs out
and fails to financially perform
on a contract, the contract
WILL BE MADE GOOD by
extracting the money from the
broker, then the Clearing
House and finally the
Exchange. This massive
enforcement buffering is what
gives the system integrity.
OTC contracts have no
exchange. They are a flipping
free-for-all. If someone bugs
out on a contract, the poop
hits the fan. The counterparty
has their pants around their
ankles and the broker is
caught in the middle. That's
why when that kid in my
office years ago got all starry-
eyed, I thought to myself, "I
wouldn't do that OTC crap if
you put a gun to my head - no
matter what the commissions
were. It would be Russian
Roulette. Eventually someone
would default and it would
financially destroy the broker
instantly, and perhaps the
counterparty as well."
Let's take my business - cattle
futures. One contract is
40,000 pounds of live cattle.
The spot contract settled at $
119.725 per hundred pounds
today. So, 40,000 pounds X $
1.19725 (shift the decimal) =
$47, 890 total value of the
contract. Since this is an
exchange traded instrument,
the customer doesn't really
don't have to worry about
default and can go ahead and
book that $47, 890 today, and
it will be offset at a later time,
and the net of the entry and
exit will be the P&L. The
contract isn't going to default,
so the derivative exposure is
limited.
Okay. These banks are
carrying these OTC futures
contracts with NO exchange to
guarantee anything. And they
are carrying these contracts
largely WITH EACH OTHER. So
JP Morgan might be the long
and Goldman Sachs, or some
insolvent bank in Europe is the
short on the other side. If
these banks default, which is
now a mathematical certainty
because they are not only
insolvent, but insolvent
multiple times over and there
isn't enough money in the
world to bail them out, there
is going to be a cascading
default on all of these OTC
contracts.
Now look at the value and
exposure of these OTC
derivatives again: the top 5
banks in the US alone have
exposure of $238 TRILLION
dollars.
The total GDP of the United
States is $14.5 Trillion.
The total GDP of China is $6
Trillion.
The total land mass on earth
is 36.8 billion acres. If every
acre of land on earth was
"sold" for $6467 per acre,
that would total $238 Trillion.
JP Morgan BY ITSELF has
derivative exposure equal to
over FIVE TIMES the value of
the entire US GDP.
And no, there will not be a
1:1 offsetting in a collapse,
because the collapse will be
asymmetrical, and the
bankrupt party will first
pursue FULL payment on its
"longs" (think of these as
accounts receivables) while its
"shorts" (accounts payable)
will only pay out 20 cents on
the dollar OR LESS. In other
words, these entities will tear
each other apart in a mad
dogfight and this dogfight will
take the entire world down
with it.
TWO HUNDRED AND THIRTY-
EIGHT TRILLION DOLLARS.
AND THAT IS JUST FIVE
BANKS.
AND THE MASSIVELY CORRUPT
AND INCOMPETENT
SECURITIES REGULATORS,
BOTH GOVERNMENTAL AND
PRIVATE, SAT BY AND
WATCHED THIS HAPPEN.
That is what happens when
you let a group of criminals
run a bureaucracy of
affirmative action hires to
"audit" the financial industry.
Scroll down and read my post
titled "There Must Be A
Reckoning."
It's over. There is no coming
back from this. The only thing
that can happen is a total and
complete collapse of
EVERYTHING we now know,
and humanity starts from
scratch. And if you think that
this collapse is going to play
out without one hell of a big
hot war, you are sadly, sadly
mistaken.
There's no way in hell we're
making it to Nov 2012
Here is an intellectually
honest trader who was
interviewed this morning by
the BBC. As much as you
may not want to believe it,
what this guy says is correct .
This iteration of human
civilization is approaching an
end.
Here is a piece from
ZeroHedge.com
that hopefully will make you
all understand, once and for
all, that this ain't the 1930's,
and that there is absolutely no
way in hell that this Republic,
or any other country, is going
to make it to November 2012.
HERE IT IS.
Summary: The five largest
banks in the U.S. (JP Morgan
Chase, Citibank, Bank of
America, Goldman Sachs and
HSBC) are carrying $238
TRILLION dollars in derivative
exposure. JP Morgan alone is
carrying $78 TRILLION in
derivative exposure BY ITSELF.
Okay, what the hell is
derivative exposure? What this
is referring to are over-the-
counter non-exchange traded
forward delivery (or "futures")
contracts of various kinds. I
am a futures broker, but I
only execute futures contracts
on the futures exchanges,
namely the Chicago Mercantile
Exchange and the New York
Mercantile Exchange.
About ten years ago a new
"novelty" emerged in the
futures business - the so-called
"over-the-counter " contracts.
There was a kid in the office I
worked in who got wind of
this and had all kinds of stars
in his eyes about making a
killing off of these "OTC"
contracts because the brokers'
commissions were not a flat
fee but a percent of the
contract value. Here's the
problem with OTC contracts:
there is no exchange standing
between the buyer and seller
as a guarantor.
In my business, when a
customer executes a trade on
a futures or options contract,
it makes no difference who
the other guy is on the other
side of the trade, be it
executed electronically or in
the pit. None of us have to
worry for a second about the
counterparty on our
executions because the
EXCHANGE ITSELF stands
between ALL transactions as
the ultimate guarantor. The
exchange then enforces the
financial requirement rules
with the Clearing Houses, the
Clearing Houses enforce the
financial requirement rules
with the brokers, and the
brokers enforce the financial
requirement rules with the
customers. That is the chain of
financial responsibility. So,
even if a customer bugs out
and fails to financially perform
on a contract, the contract
WILL BE MADE GOOD by
extracting the money from the
broker, then the Clearing
House and finally the
Exchange. This massive
enforcement buffering is what
gives the system integrity.
OTC contracts have no
exchange. They are a flipping
free-for-all. If someone bugs
out on a contract, the poop
hits the fan. The counterparty
has their pants around their
ankles and the broker is
caught in the middle. That's
why when that kid in my
office years ago got all starry-
eyed, I thought to myself, "I
wouldn't do that OTC crap if
you put a gun to my head - no
matter what the commissions
were. It would be Russian
Roulette. Eventually someone
would default and it would
financially destroy the broker
instantly, and perhaps the
counterparty as well."
Let's take my business - cattle
futures. One contract is
40,000 pounds of live cattle.
The spot contract settled at $
119.725 per hundred pounds
today. So, 40,000 pounds X $
1.19725 (shift the decimal) =
$47, 890 total value of the
contract. Since this is an
exchange traded instrument,
the customer doesn't really
don't have to worry about
default and can go ahead and
book that $47, 890 today, and
it will be offset at a later time,
and the net of the entry and
exit will be the P&L. The
contract isn't going to default,
so the derivative exposure is
limited.
Okay. These banks are
carrying these OTC futures
contracts with NO exchange to
guarantee anything. And they
are carrying these contracts
largely WITH EACH OTHER. So
JP Morgan might be the long
and Goldman Sachs, or some
insolvent bank in Europe is the
short on the other side. If
these banks default, which is
now a mathematical certainty
because they are not only
insolvent, but insolvent
multiple times over and there
isn't enough money in the
world to bail them out, there
is going to be a cascading
default on all of these OTC
contracts.
Now look at the value and
exposure of these OTC
derivatives again: the top 5
banks in the US alone have
exposure of $238 TRILLION
dollars.
The total GDP of the United
States is $14.5 Trillion.
The total GDP of China is $6
Trillion.
The total land mass on earth
is 36.8 billion acres. If every
acre of land on earth was
"sold" for $6467 per acre,
that would total $238 Trillion.
JP Morgan BY ITSELF has
derivative exposure equal to
over FIVE TIMES the value of
the entire US GDP.
And no, there will not be a
1:1 offsetting in a collapse,
because the collapse will be
asymmetrical, and the
bankrupt party will first
pursue FULL payment on its
"longs" (think of these as
accounts receivables) while its
"shorts" (accounts payable)
will only pay out 20 cents on
the dollar OR LESS. In other
words, these entities will tear
each other apart in a mad
dogfight and this dogfight will
take the entire world down
with it.
TWO HUNDRED AND THIRTY-
EIGHT TRILLION DOLLARS.
AND THAT IS JUST FIVE
BANKS.
AND THE MASSIVELY CORRUPT
AND INCOMPETENT
SECURITIES REGULATORS,
BOTH GOVERNMENTAL AND
PRIVATE, SAT BY AND
WATCHED THIS HAPPEN.
That is what happens when
you let a group of criminals
run a bureaucracy of
affirmative action hires to
"audit" the financial industry.
Scroll down and read my post
titled "There Must Be A
Reckoning."
It's over. There is no coming
back from this. The only thing
that can happen is a total and
complete collapse of
EVERYTHING we now know,
and humanity starts from
scratch. And if you think that
this collapse is going to play
out without one hell of a big
hot war, you are sadly, sadly
mistaken.
