Chapter 2 (of 4) — The derivatives market and the financial meltdown.
One of the biggest risks to the world’s financial health is the $ 1.2 quadrillion derivatives market. Its complex, it’s unregulated, and it ought to be of concern to world leaders that its notional value is 20 times the size of the world economy. How big is the risk to the world economy from these derivatives? Since they’re unregulated and likely to remain so, it is hard to gauge the risk since no one has visibility to the shady deals going on behind closed doors. But we’re still struggling to recover from the last small glitch in the market. This was like a case of the common cold. The next one might cause pneumonia and the patient (the world economy) might die.
If this $1.2 quadrillion derivatives market is such a risk why doesn’t our government do something to correct the situation? There are two reasons:
First, the general public doesn’t know the derivatives market even exists. Even if they heard about it they couldn’t understand it because it is a secret market unregulated by our government. All trading goes on behind closed doors. And unless the public is screaming that something must be done, our representatives in Washington aren’t about to do anything.
The second reason nothing has been done is that these big money wheeler dealers are so powerful that our representatives cower at the thought of standing up to them. We talk about politicians being bought; well that is where the money comes from. The $1.2 quadrillion derivatives market provides a lot of money to be spread around.
Can politicians really be bought that easily and openly? Well let’s look at the current financial crisis and see if we can spot anything suspicious. Billions of taxpayer dollars were spent bailing out corrupt banks and financial institutions. Wonder if there’s anything there. Let’s take a look at Obama’s 2008 campaign top contributors. That’s very interesting. Four of the top ten contributors just happen to be among the top ten financial institutions that got bailed out. They are Goldman Sachs, JP Morgan Chase, Citigroup and Morgan Stanley. The table below lists their
payoffs contribution amounts and their government pay-back:
|CONTRIBUTORS TO OBAMA’S 2008 CAMPAIGN|
|BANKS||PAYOFF FROM TARP|
|JPMorgan Chase & Co||$808,799||$25,000,000,000|
|General Electric||$529,855||0 Taxes Paid|
General Electric, how’d they get in there? I guess because they’ve been in the news lately because people are wondering how they could make billions of dollars of profit last year and pay “zero” taxes. The rest of you poor working stiffs pay up to 33% of your hard earned income in taxes. Maybe so but you didn’t contribute $529,855 to Obama’s 2008 campaign.
And who says bank executives are incompetent? It looks like the above referenced banks made very sound investments in their representatives in Washington. They earned a phenomenal return on their investments. Citigroup earned a 6,786% return on their investment in less than two years. The U.S. citizens are the dumb ones. They settle for 0.2% annual return on their savings accounts in these same banks. Let me see if I got this straight. The banks give their depositors 0.2% for the use of their money. The banks turn around and invest it and earn 6,786% return on their investment. And somehow the banks manage to lose money in the process and go bankrupt. I guess that is why the terms greed, corruption, criminals, and bought and paid for politicians are being used so often by the public.
So now you see why the $1.2 quadrillion derivatives market is so dangerous. The enormity of it will sink the world economy overnight when things go awry again. And most governments are already bankrupt bailing out the banks from the last time. They won’t be able to recover in time to bail them out again. What makes this worse is that the government is worse than useless; they are actually in on it. So don’t look for any help there.
In the next chapter 3 we will show how the government has a long history of aiding and supporting the corrupt financial system. Don’t miss it. You future, the future of your children and the country depend upon the American people waking up to what is going on. We need to take a united front against our corrupt government.