Derivative Lessons Learned?
Do you know how we hoped that financial markets learned their lesson concerning derivatives when the global financial markets came within hours of a total collapse? Well, they didn’t!
The 2008 Crash was caused by the unregulated derivatives markets. And if you think that problem has been fixed, you’re mistaken.
DB [Deutsche Bank] sits atop the largest derivatives book in the world.
Deutsche Bank & Derivatives
Now keep in mind that Deutsche Bank is essentially the European Central Bank.
This one bank has over $75 trillion in derivatives on its balance sheet. This is over 20 times German GDP and roughly the same size as global GDP.
At this size, if even 0.01% of these derivatives are “at risk,” you’ve wiped ALL of the banks’ capital.
At some point this whole mess will come crashing down just as it did in 2008. The derivatives market remains a $600 TRILLION Ticking Time Bomb.
Is There a Derivative Time Bomb?
How long can that bomb continue to tick? Nobody knows! It could be before I finish typing this sentence, or ten years. Well, obviously, it wasn’t the first; but, it’s very doubtful that it will be the latter. The odds are that it will be sometime this fall.
Image from Russia Insider