Could The Global Derivatives Market Tip Over?
- Financial derivatives are financial weapons of mass destruction according to Warren Buffet. He is correct. These instruments are largely held/controlled by Illuminists banks. This coming collapse of the derivatives market will result in a global economic, financial and monetary collapse. The Illuminists will collapse the Eurozone via the PIIGS to provide cover for their criminal machinations and they will start their Satanic World War 3. Watch the preparations for war against Iran. It is a sign that the plug will be pulled soon!
Could the Global Derivatives Market Tip Over?
by David Chapman, http://www.goldseek.com/
The picture is rather stark. This is a chart shown in an article at Global Research (www.globalresearch.ca) – Financial Implosion: Global Derivatives at 1,200 Trillion Dollars 20 Times the World Economy. It bears repeating.
Specifically the chart shows the assets of five of the USA’s largest banks vs. their respective derivative position. Derivatives dwarf the asset position of the banks. Wachovia and HSBC (USA) are not even amongst the top five derivative players in the US. The top five in order are JP Morgan Chase, Bank of America, Morgan Stanley, Citigroup and Goldman Sachs. There is a huge drop off in derivative positions after the top five players.
The global derivatives market is estimated by some at $1,200 trillion ($1.2 quadrillion). Estimating the size of the market is difficult. The Bank for International Settlements (BIS) shows a size of $647 trillion as of December 2011. However, some market followers who have written books on the subject have estimated the market as being even larger at upwards of $1.2 quadrillion. At that level it is 20 times the size of the global economy estimated at $60 to $70 trillion.
The global derivatives market is unregulated and quite possibly under reported. The financial institutions have successfully lobbied for years to block any attempt at regulating the market. Roughly 75% of the market is interest rate contracts (i.e. forward rate agreements, interest rate swaps (the largest component) and options on interest rates). The next largest component is foreign exchange contracts and that only constitutes roughly 10% of the market. The third largest category is credit default swaps (CDS) and that makes up roughly 4% of the market. The rest of the market consists of commodity contracts and equity linked contracts.
As noted the BIS estimates the size of the global derivatives market at $647 trillion as of December 2011. But the BIS number only includes the over the counter market (OTC). It does not include exchange traded derivatives. Overall the global OTC derivatives market has a gross credit exposure of $3.9 trillion. What that effectively means is that if all of the derivative contracts defaulted the hit to the financial institutions would be $3.9 trillion. According to www.banksdaily.com the market capitalization of the world’s largest banks who are the most likely to be involved in the global derivatives market is $2.6 trillion. The potential credit exposure of derivatives exceeds the bank’s capital.
In the global derivatives market the big five US banks dominate the market. In a total global derivatives market using the BIS number of $647 trillion JP Morgan is the world’s largest with at least $70 trillion of derivatives and possibly as high as $80 trillion. JPM’s derivative position is against an asset base of $1.8 to $2.2 trillion. JPM is estimated to have credit exposure for their derivatives of 256% of capital. For the top five US banks the ratio is 316%. This far exceeds the estimated global credit exposure of derivatives when compared to the market cap of the world’s largest banks.
Sorry, the comment form is closed at this time.