Today there is a horrific derivatives bubble that threatens to destroy not only the U.S. economy but the entire world financial system as well, but unfortunately the vast majority of people do not understand it. When you say the word "derivatives" to most Americans, they have no idea what you are talking about. In fact, even most members of the U.S. Congress don’t really seem to understand them. But you don’t have to get into all the technicalities to understand the bigger picture.
Basically, derivatives are financial instruments whose value depends upon or is derived from the price of something else. A derivative has no underlying value of its own. It is essentially a side bet. Originally, derivatives were mostly used to hedge risk and to offset the possibility of taking losses. But today it has gone way, way beyond that. Today the world financial system has become a gigantic casino where insanely large bets are made on anything and everything that you can possibly imagine.
The derivatives market is almost entirely unregulated and in recent years it has ballooned to such enormous proportions that it is almost hard to believe. Today, the worldwide derivatives market is approximately 20 times the size of the entire global economy.
Because derivatives are so unregulated, nobody knows for certain exactly what the total value of all the derivatives worldwide is, but low estimates put it around 600 trillion dollars and high estimates put it at around 1.5 quadrillion dollars.
Do you know how large one quadrillion is?
Counting at one dollar per second, it would take 32 million years to count to one quadrillion.…
If you watch any mainstream news program these days, it is almost a certainty that someone will mention the word "recession" before a half hour passes. In fact, it seems like almost everyone is either predicting that we are going into a recession, or they are warning of the need to avoid a recession or they are proclaiming that we are still in a recession. So will the U.S. economy once again be in recession in 2010? When you consider all the signs that are pointing that way, the evidence is compelling. The truth is that there is bad economic news wherever you turn. There is bad news in the housing industry. There is bad news in the financial markets. There is bad news in the banking system. There is bad news coming out of Europe. There are even signs that the bubble in China may be about to burst. Plus, the economic impact of the Gulf of Mexico oil spill could end up being the straw (or the gigantic concrete slab) that really breaks the camel’s back. So there are certainly a lot of pieces of news that "gloom and doom" economists can hang their hats on these days. There is a very dark mood in world financial markets right now, and it seems like almost everyone is waiting for the other shoe to drop. But does all of this really mean that we are looking at the start of another recession before the end of 2010?
The truth is that nobody really knows. Things certainly look very ominous out there. The dark clouds are gathering and the economic winds are starting to blow in a bad direction. The following are 24 pieces of evidence that do seem to indicate that very difficult economic times are imminent….
-U.S. Treasury yields have dropped to stunning new lows. So why are they so low? Well, it is because so many investors are anticipating that we are headed into a deflationary period. In fact, many economists are warning that the fact that Treasury yields are so low is…
"We will have another armed robbery unless we prevent the banks, the banks that are too big to fail. We should say that if you’re too big to fail then you are too big to be. They need more restrictions, such as no derivative trading.” Joe Stiglitz
If a Nobel Prize winner in economics says the obvious, besides a few diligent bloggers, perhaps other economists will obtain ‘air cover’ in speaking about the economic and regulatory absurdity taking place today in the US and the UK. Winning the Nobel is even better than tenure.
Here is avideo of his speech in Brussels, because this Bloomberg article leaves out some of the more ‘pithy’ remarks on the Wall Street bank bonuses, the errors efficient market theory, political and ideological capture, lies (his wording) told by central bankers including Alan Greenspan, unproductive "taxes" by banks on the real economy, ‘criminal’ management of beta, and the social costs of this financial crisis from Joe Stiglitz from the Brussels banking conference.
Stiglitz characterizes the reforms being put forward by the US Congress as completely wrong, and harmful. Watch the video, and compare what Joe Stiglitz is saying with the ponderous mendacity of Larry Summers, and you may better understand why Obama’s policies are doomed to failure.
It does not take much imagine to see how things might be quite different if Joltin’ Joe was the Chief Economic Advisor or Fed Chairman, rather than ‘Last War’ Larry or Zimbabwe Ben.
Oct. 12 (Bloomberg) — Large banks should be banned from trading derivatives including credit default swaps, said Joseph Stiglitz, the Nobel prize-winning economist.
The CDS positions held by the five largest banks posed “significant risk” to the financial system, Stiglitz said at a press conference in Brussels. Big banks should have extra restrictions placed on them, including a ban on derivative trading, because of the risk that they would need government money if they fail, he said in a speech today.
War is Peace, Freedom is Slavery, Ignorance is Strength, and Debt is Recovery
In light of the ever-present and unyieldingly persistent exclamations of ‘an end’ to the recession, a ‘solution’ to the crisis, and a ‘recovery’ of the economy; we must remember that we are being told this by the very same people and institutions which told us, in years past, that there was ‘nothing to worry about,’ that ‘the fundamentals are fine,’ and that there was ‘no danger’ of an economic crisis.
Why do we continue to believe the same people that have, in both statements and choices, been nothing but wrong? Who should we believe and turn to for more accurate information and analysis? Perhaps a useful source would be those at the epicenter of the crisis, in the heart of the shadowy world of central banking, at the global banking regulator, and the “most prestigious financial institution in the world,” which accurately predicted the crisis thus far: The Bank for International Settlements (BIS). This would be a good place to start.
The economic crisis is anything but over, the “solutions” have been akin to putting a band-aid on an amputated arm. The Bank for International Settlements (BIS), the central bank to the world’s central banks, has warned and continues to warn against such misplaced hopes.
What is the Bank for International Settlements (BIS)?
The BIS emerged from the Young Committee set up in 1929, which was created to handle the settlements of German reparations payments outlined in the Versailles Treaty of 1919. The Committee was headed by Owen D. Young, President and CEO of General Electric, co-author of the 1924 Dawes Plan, member of the Board of Trustees of the Rockefeller Foundation and was Deputy Chairman of the Federal Reserve Bank of New York. As the main American delegate to the conference on German reparations, he was also accompanied by J.P. Morgan, Jr. What emerged was the Young Plan for German reparations payments.
The Plan went into effect in 1930, following the stock market crash. Part of the Plan entailed the creation of an international settlement organization, which was formed in 1930, and
Traders, bloggers, media talking heads, and pundits of all stripes went into a feverish sweat as they anticipated the comments of Federal Reserve Chairman Janet Yellen at the annual economic summit held in Jackson Hole, Wyoming. When Yellen, arguably the most dovish Fed Chairman in history, uttered, “I believe the case for an increase in the federal funds rate has strengthened in recent months,” an endless stream of commentators used this opportunity to spout out a never-ending stream of predictions describing the looming consequences of such a potential rate increase.
As I’ve stated before, the Fed receives both too much blame and too much credit for...
Only two of the eight equity indexes on our global watch list posted week-over-week gains in our latest update, same as last week. The two Eurozone indexes, France's CAC and Germany's DAXK, were the two who finished in the green, a shift from the Asian advance the previous week, when the Shanghai and Hang Seng were the sole gainers. In fact, the Shanghai Composite did a complete flip from its 1.88% gain the previous week to its -1.22% finish on Friday. The average of the eight improved fractionally from -0.56% the previous week to -0.39% for the latest.
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. We'...
Negative rates should be integral part of central bank policy options … Central banks should make negative interest rates a fully integrated part of monetary policy in order to respond effectively to future recessions, according to an academic paper presented on Friday to some of the world’s top central bankers. “It is only a matter of time before another cyclical downturn calls for aggressive negative nominal interest rate policy actions,” concludes Marvin Goodfriend, a professor of economics at Carnegie Mellon University and a former po...
Before-tax corporate earnings fell 4.9 percent in the second quarter from a year earlier, the fifth consecutive decline and the worst streak since the end of the recession in mid-2009, Commerce Department figures showed on Friday.
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Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer. One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."
Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.
Genetic components are the DNA sequences that are 'inherited.' Some of these genes are stronger than others in their expression (e.g., eye color). Yet, some genes turn on or off due to external factors (environmental), and it is und...
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Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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