tick tock tick tock
2008 -- housing bubble
2012 -- derivative exposure
201x -- municipal bonds bubble
Are you pissed off yet?
From
The Hill:
Moody's downgrades 15 of the world's biggest banks
Moody's Investors Service issued downgrades to 15 of the world's biggest banks Thursday, saying that they all had "significant exposure" to volatility and risk inherent in their global trading activities.
Banks such as Goldman Sachs, JPMorgan Chase, and Bank of America were among the firms downgraded by the rating agency � a move that could require the banks to pony up billions in additional collateral to cover their derivatives transactions, and also make it more expensive for them to borrow.
And of course:
As rumors of the downgrades spread among financial markets Thursday afternoon, stocks took a steep turn for the worse. The Dow Jones Industrial Average close the day down 250 points or nearly two percent, its second worst day of the year.
From the excellent
Demonocracy:
Derivatives: The Unregulated Global Casino for Banks
A buys you the option (but not obligation) to buy oil in 6 months for today's price/any agreed price, hoping that oil will cost more in future. (I'll bet you it'll cost more in 6 months). Derivative can also be used as insurance, betting that a loan will or won't default before a given date. So its a big betting system, like a Casino, but instead of betting on cards and roulette, you bet on future values and performance of practically anything that holds value. The system is not regulated what-so-ever, and you can buy a derivative on an existing derivative.
Most large banks try to prevent smaller investors from gaining access to the derivative market on the basis of there being too much risk. Deriv. market has blown a galactic bubble, just like the real estate bubble or stock market bubble (that's going on right now). Since there is literally no economist in the world that knows exactly how the derivative money flows or how the system works, while derivatives are traded in microseconds by computers, we really don't know what will trigger the crash, or when it will happen, but considering the global financial crisis this system is in for tough times, that will be catastrophic for the world financial system since the 9 largest banks shown below hold a total of $228.72 trillion in Derivatives - Approximately 3 times the entire world economy. No government in world has money for this bailout.
The post employs some very nice visuals -- makes it very clear.
Municipal Bonds? Considering how most American cities are faring, not a big stretch (Detroit? Detroit to the courtesy phone please). My Mom and Dad invested in them and the monthly checks are down 30% in the last year. Used to be "safe" -- now, not so much.
Posted by DaveH at June 21, 2012 10:05 PM