muses of the moment

March 8, 2009

Elephant in the room

Filed under: The Financial Crisis — totallygroovygirlfriday @ 2:29 pm

There was an excellent explanation of the derivatives market and its impact on the global economy on Friday by Thomas Kostigan.

View here

Thomas makes the wonderful analogy of the derivatives market: a game of musical chairs with no chairs. Look at the numbers Thomas is talking about in his article. Even if the government could print enough money to cover the derivative bets, then inflation would implode the markets. That may happen anyway.

Jim Sinclair of says the $700 trillion number is only valid if you settle these contracts when the market is good. If you value them to the market now, it is over one quadrillion dollars.

And who owns these derivatives that are not worth a penny?

  • Global governments and sovereign funds
  • Pension funds
  • Banks
  • Hedge funds
  • Companies
  • Brokerage houses
  • The shadow banking system
  • Everyone and every identity that invests on this planet

As soon as this all begins to be understood, all investors, large and small, will start investing in actual things. Such as commodities, gold, farming, and mining.

And….the law suits will start flying, so you have the option of becoming a financial law attorney.

If you are a long term investor, start investing commodities now.

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