This isn’t new but it’s certainly clear and devastating in its implications. From Paul Craig Roberts last week:
“US banks’ derivative bets of $230 trillion, concentrated in five banks, are 15.3 times larger than the US GDP. A failed political system that allows unregulated banks to place uncovered bets 15 times larger than the US economy is a system that is headed for catastrophic failure. As the word spreads of the fantastic lack of judgment in the American political and financial systems, the catastrophe in waiting will become a reality.” Paul Craig Roberts, Collapse at Hand, June 5
Numerian had a solution for this in 2008:
There needs to be an accounting and a correction – and not by the usual suspects. Here’s one way to start with derivatives crisis in major institutions:
“If all the top 25 financial institutions were put into receivership, and (big if) if they all could be liquidated under an agreed legal framework, many of these risky contracts could be allowed to offset each other, and much of the risk eliminated.” Private correspondence, Numerian, The Agonist, Sept. 21, 2008 From Michael Collins, Meltdown Perpetrators, Sep. 2008
So, how long are we going to be held hostage by the big banks and the uber-wealthy?
Roberts’ solution is clear and in line with Numerians:
“Everyone wants a solution, so I will provide one…
“The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.” Paul Craig Roberts, Collapse at Hand, June 5
Let’s do it, soon!