[Quinny]

Help me please - the derivatives market has been descibed as a casino worth over a quadrillion dollars.

A couple of questions:
When people bet there are winners and losers. Who are the winners in the above market? Who owns the casino?

If as I think that the winners are also losers, then is it possible that by contra-ing the bets that the impact could be minimised.

If there are big winners and then big losers, then appropriate the funds of the winners (or at least tax the hell out of them).

The owners of the casino must be getting a cut in some way. Why can't we just tax them, (and close the casino's down).

If for some reason the information isn't public then just declare them null & void unless they are put before a regulator. The winners would soon give the info up in that event.

[ReverseEngineer]

There might be Winners and Losers, but unwinding all these contracts is close to impossible, and besides that, just where did the Quadrillion bet here come from? It never existed anywhere except in the mind of the bettor and the creators of the scheme. They were betting non-existent money far in excess of what actually existed in the money supply.

Now you might say that since this money never really existed, just declare all CDS contracts null & void, forget about them. The problem here being that these instruments were used to keep otherwise failing institutions afloat, get rid of them and they sink immediately. Anyone on the WINNING side of some contract does NOT want to see it voided, the Loser of course does. No agreement can be reached between these parties, so the system remains tied up in knots.

Time will tell how it will play out, IMHO the system crashes before you could unwind all this stuff anyhow.

Reverse Engineer

[Ayame]

These CDS are boggling my mind too. There was a piece on them on Sky News a few days back at around 8.30am. They described it as the nuclear bomb of the financial markets and that in total they were worth more than the GDP of the entire world. But they quickly moved on without explaining in detail. In fact I think I will head over to wiki right now.

[Quinny]

We seem to be mainly agreeing on this one.

Are there any experts out there who could give us a hand?

[Gerben]

link Seems like this guy profitted. Winners win paper (or digital) money only. No real wealth is destroyed in this crisis, only money.

[Micki]

You also have the potential of a domino effect.
i.e.
A topples over,
B was protected/hedged through derivatives with A and cannot meet obligations to C etc.
Given the large amounts committed in derivateves compared to the real market, one big blow up can set of a long chain reaction.

[virgincrude]

Check this out: Coming Soon: The 6 Trillion Derivatives Emergency Meeting

It boggles the mind, even of the experts.

Also, read this: Catherine Austin Fitts: The Two Great Financial Mysteries of Our Time: Missing Money and Collateral Fraud

How big is the missing collateral black hole and how will it be resolved?
These two mysteries are essentially part of one mystery at the heart of the matter: Who is in charge of—and what are—the real financial flows and assets of the central banking/warfare complex that increasingly governs the resources on our planet?
Since all financial frauds—the manipulation of the precious metals markets, the engineering of the mortgage and housing bubble, ongoing naked short selling, Enron, and the pump and dump of the Internet and telecom stocks—come back to the same cast of characters, our ability to protect our families and assets necessitates an integrated understanding of “the real deal”—who is really in charge and how the economy is really managed. Hence, it is useful to have a basic understanding of the missing money and missing collateral mysteries.

The Casino is owned by the same cast of characters who are busy bailing themselves out in the US and Europe, i.e the Banksters. They have already won, and it simply remains for them to prop up the ponzi scheme which is banking, by robbing A to prop up B, C and so on. The problem in this casino, is that A is the ordinary citizen, the small business owner, who participated in the gamble largely because he has been presented with no alternative whatsoever. The Casino owner always makes sure the odds are rigged in his favour, and always ensures the tables turn inhis favour.

[galacticsurfer]

It is all unregulated side bets of hedgies and banks over tax havens and such, off-book.

Say you are playing monopoly with 8 people or so. the rules are clear. so it is a very long and boring game and a coupleof wise guys start taking pieces of paper and writing IOUs on them for the case that soembody goes over go or gets out of jail or takes a certain row of houses, etc. Pretty soon the bets are worth more than the whole game is worth and then it just keeps growing an everybody is getting involved till they forget the game itself with the houses and such. Then somebody loses one of the bets big time and the whole pyramid falls apart. Everybody gets together and says that they will go to the color photocopy machine and PC and make up some real looking monopoly money to bail them out, maybe billion dollar denominations or so.

[Quinny]

If no-one really knows, we could be worrying about nothing (literally - it could be a zero sum game). Why don't we just say sorry all bets are off, unless claims are put before regulators and then at least we know the size of the problem.

[dohboi]

Regulators, ha!

The regulators ARE the perpetrators. The foxes really are the guardians of the hen house. So many former execs from GS are in the treasury dept, they call it 'Government Sachs'.

link

[Ayame]

It seems that a lot of these CDS are not backed up by any real assets. It's like a betting game blown up on a tremongous financial scale. I read that when they first invented credit debit swaps they called them swaps because if they had used the word insurance they would have been regulated and the banks wanted to avoid the regulation.

[Quinny]

So the winners are the regulators??? :}

Regulators, ha! The regulators ARE the perpetrators. The foxes really are the guardians of the hen house. So many former execs from GS are in the treasury dept, they call it 'Government Sachs'. link

[virgincrude]

Regulators, ha! The regulators ARE the perpetrators. The foxes really are the guardians of the hen house. So many former execs from GS are in the treasury dept, they call it 'Government Sachs'.

Indeed.

In recent testimony under oath by Mr Lynn Turner, Chief Accountant of the Securities & Exchange Commission (SEC) testified that the SEC Office of Risk Management which had oversight responsibility for the Credit Default Swap market, an exotic market worth nominally some $62 trillions, was cut in Administration ‘budget cuts’ from a staff of one hundred down to one person. Yes, that was not a typo. That’s one as in ‘Uno.’
Vermont Democratic Congressman Peter Welsh queried Turner, ‘... was there a systematic depopulating of the regulatory force so that it was impossible actually for regulation to occur if you have one person in that office? ...and then I understand that 146 people were cut from the enforcement division of the SEC, is that what you also testified to?’ Mr. Turner, in Congressional testimony replied, ‘Yes…I think there has been a systematic gutting, or whatever you want to call it, of the agency and it's capability through cutting back of staff.’

[TheDude]

Check this out: Coming Soon: The 6 Trillion Derivatives Emergency Meeting
It boggles the mind, even of the experts.

You'll be even more boggled when you add the two missing zeros to your link's title.

Talking about ephemeral financial instruments having a greater value than 10 straight years of World GDP is...is...it's like a plot device from an old Phillip K Dick novel, is what it is. A cop who wears a device that renders himself invisible to outsiders, who's investigating a drug ring who are using a substance that blurs the user's sense of reality - and one of the users he's watching on video tape may actually be the cop himself? That's clear as crystal next to the idea of an investment bank having more quasi-cash on its books than an entire nation's raw materials output; but there you are!

[Quinny]

So where's all the trillions of debts?

Who are the winners? So far we've been pointed at one relatively minor player a Mr Lahde.

Surely trillions can't disappear, we should be able to track it down.

Offer the losers a way out, ie cancel all bets and the winners would soon crawl out of the woodwork.

Come on their must be someone who can help find where it's going.

[Duende]

galacticsurfer wrote:

Say you are playing monopoly with 8 people or so. the rules are clear. so it is a very long and boring game and a coupleof wise guys start taking pieces of paper and writing IOUs on them for the case that soembody goes over go or gets out of jail or takes a certain row of houses, etc. Pretty soon the bets are worth more than the whole game is worth and then it just keeps growing an everybody is getting involved till they forget the game itself with the houses and such. Then somebody loses one of the bets big time and the whole pyramid falls apart. Everybody gets together and says that they will go to the color photocopy machine and PC and make up some real looking monopoly money to bail them out, maybe billion dollar denominations or so.

Wow, excellent example. That clears it up for me I think. It will be interesting to see what outcomes - both expected and unexpected - will result.

[dohboi]

Good question, Quinny. But again, the whole thing is intentionally obscure to hide the major players and the exact amounts. We may never know who all the money is being funneled to.

A few years ago, a certain millionaire warned that a certain international agreement would cause a "vast sucking sound" as all American dollars got sucked south of the border.

It turns out that the sucking sound is vacuuming up money from around the world, putting it into banks, and from there, who knows?

By the way, you're not Danny Quinny by any chance??

And yes, the whole set of schemes should have been regulated as insurance, but the few regulators who suggested such a common sense notion were shut down. Remember we are just barely awaking from a long sleep where the magic of the market was going to solve all problems and all notions of regulating said magic were demonized to oblivion.

We wake from our long reverie to find not only our pockets picked, but our clothes gone, many internal organs missing, and our children, grandchildren...down the generations sold into perpetual debt serfdom.

Happy trails to all.

[Quinny]

Not Danny, but I've sung drunkenly about the boy occasionally.

South of the border, is this metaphorical, because the amounts quoted would make mexicans very happy indeed.

I personally still have this nagging doubt that we're talking about a zero-sum balloon type game where eg Barclays owe Goldman owe Morgan owe Barclays. The losses to the system in this case would be marginal and the margins taken by the house.

I know the system stinks, but governments will fall over this and I would hope that politicians have the balls to stand up to the w.. sorry bankers. If they simply say cancel all cds bets it could save them trillions (and their arses)!

[Stratovarius]

I got a question myself... How do you place a value on a contract? Is it merely the underlying asset's value in the contract? Then how do we have a quadrillion bucks of this stuff?

wtf

[virgincrude]

It boggles the mind, even of the experts.

You'll be even more boggled when you add the two missing zeros to your link's title.
Talking about ephemeral financial instruments having a greater value than 10 straight years of World GDP is...is...it's like a plot device from an old Phillip K Dick novel, is what it is. A cop who wears a device that renders himself invisible to outsiders, who's investigating a drug ring who are using a substance that blurs the user's sense of reality - and one of the users he's watching on video tape may actually be the cop himself? That's clear as crystal next to the idea of an investment bank having more quasi-cash on its books than an entire nation's raw materials output; but there you are

Excellent! NOW I understand.

Boggled, absolutely boggled, I am. That, and gormless, just plain gormless. Where did my gorm go?