I Called It… Part 6: Counter-Party Risk

I started off the year with Silver Shield Report #13- What Could, Would and Should Happen in 2012. I said that this year counter party risk would be most important in this end of fiat.  All paper wealth has counter-party risk. Your stocks, bonds, CDs, IRA, 401K, cash, and even Real Estate are all at risk.  I have beat the war drums for people to get into real tangible assets like silver.

Now this…

Marc Faber says that Trillions in derivatives will get wiped out for 0.

TBTF Get TBTFer: Top 5 Banks Hold 95.7%, Or $221 Trillion, Of Outstanding Derivatives

Tyler Durden's picture

Submitted by Tyler Durden on 03/26/2012 16:04 -0400
Every quarter the Office of the Currency Comptroller releases its report on Bank Derivative Activities, and every quarter we find that the Too Big To Fail get Too Bigger To Fail. To wit: in Q4 2011, of the total $230.8 trillion in US outstanding derivatives, the Top 5 banks (JPM, BofA, Morgan Stanley, Goldman and HSBC) accounted for 95.7% of all Derivatives. In some respects this is good news: in Q2, the Top 5 banks held 95.9% of the $250 trillion in derivatives. Unfortunately it is also bad news, because $220 trillion is more than enough for the world to collapse in a daisy chained failure of bilateral netting (which not even all the central banks in the world can offset). What is the worst news, is that the just released report indicates that in addition to everything else, we have now hit peak delusion, as banks now report to the OCC that a record high 92.2% of gross credit exposure is “bilaterally netted.” While we won’t spend much time on this issue now, it is safe to say that bilateral netting is the biggest lie in modern finance (read How US Banks Are Lying About Their European Exposure; Or How Bilateral Netting Ends With A Bang, Not A Whimper for an explanation of this fraud which was exposed completely in the AIG collapse). And just to put this in global perspective, according to the BIS in the first half of 2011, global derivative gross exposure increased by $107 trillion to a record $707 trillion. It will be quite interesting to get the full year report to see if this acceleration in gross exposure has increased. Because if it has, we will now know that in 2011 European banks were forced up to load up on several hundred trillion in mostly interest rate swap exposure. Which can only mean one thing: when and if central banks lose control of government bond curves, an rates start moving wider again, the global margin call will be unprecedented. Until then we can just delude ourselves that central planners have everything under control, have everything under control, have everything under control.

Those that did not see this coming should have NO say in where we go after it gets here.

Get ahead of the curve and join a group of forward and positive thinking people, ready to create our own paradigm in the Silver Shield Report.

3 comments to I Called It… Part 6: Counter-Party Risk

  • Chris

    Hey Tyler,

    I am disgusted. Where is Dodd-Frank, where is the OTC regulation? This insane appetite for risk from US banks is fully justified as they did not pay the cost of the moral hazard they inflicted on us the first time around. The world better get its act together and recognize who these people are: psychopaths.

    Keep up the good work Tyler

  • adam

    You are and remain spot on.

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