PAY ATTENTION NOW, WE ARE VERY CLOSE TO DOOM: A Shortage of Bonds to Back Derivatives Bets
Starting next year, new rules will force banks, hedge funds, and other traders to back up more of their bets in the $648 trillion derivatives market by posting collateral. While the rules are designed to prevent another financial meltdown, a shortage of Treasury bonds and other top-rated debt to use as collateral may undermine the effort to make the system safer.
Derivatives allow buyers to bet on the direction of currencies, interest rates, and markets, insure against defaults on bonds, or lock in a price on commodities. The new rules are rooted in the 2010 Dodd-Frank Act, passed in reaction to the near-collapse of the financial system in 2008, which was caused in part because derivatives contracts weren’t backed by enough collateral. American International Group (AIG) needed a $182.3 billion bailout from the U.S. government after it failed to make good on derivatives trades with some of the world’s largest banks. In response, Congress required that most privately negotiated derivatives transactions, known as over-the-counter trades, go through clearinghouses.
Clearinghouses, run by firms such as Chicago-based CME Group (CME) and London-based LCH.Clearnet Group, make traders provide collateral, including government bonds, that can be seized and easily converted into cash to cover defaults. Traders may need from $2 trillion to $4 trillion in extra collateral to meet the new requirements, according to Timothy Keaney, chief executive officer of BNY Mellon Asset Servicing.
Confirms everything we pretty much knew.
FED creates 40 Billion “out of air” and buys Mortgage-Backed-Securities (MBS) from banks PER MONTH. The banks take that 40 Billion and will NOT loan it out to small businesses but rather reinvest it in the Treasury market, making money there and helping the FED keep the game going (paying the interest on our debt and suppressing rates).
Bernanke then uses the 40 Billion PER MONTH of MBS he just bought with YOUR money, and uses that as collateral to secure 9x that in DERIVATIVES!!
That’s fractional-reserve banking for ya. That is why this is the largest ponzi scheme in world history.
Here is latest from pastor linzy Williamson as of 9-19 great interview