Casino Capitalism and the Derivatives Market: Time for Another ‘Lehman Moment’?
Reading the tea leaves for the 2024 economy is challenging. On January 5th, Treasury Secretary Janet Yellen said we have achieved a “soft landing,” with wages rising faster than prices in 2023. But critics are questioning the official figures, and prices are still high. Surveys show that consumers remain apprehensive.
There are other concerns. On Dec. 24, 2023, Catherine Herridge, a senior investigative correspondent for CBS News covering national security and intelligence, said on “Face the Nation,” “I just feel a lot of concern that 2024 may be the year of a black swan event. This is a national security event with high impact that’s very hard to predict.”
What sort of event she didn’t say, but speculations have included a major cyberattack; a banking crisis due to a wave of defaults from high interest rates, particularly in commercial real estate; an oil embargo due to war. Any major black swan could prick the massive derivatives bubble, which the Bank for International Settlements put at over one quadrillion (1,000 trillion) dollars as far back as 2008. With global GDP at only $100 trillion, there is not enough money in the world to satisfy all these derivative claims. A derivative crisis helped trigger the 2008 banking collapse, and that could happen again.
The dangers of derivatives have been known for decades. Warren Buffett wrote in 2002 that they were “financial weapons of mass destruction.” James Rickards wrote in U.S. News & World Report in 2012 that they should be banned. Yet Congress has not acted. This article looks at the current derivative threat, and at what might motivate our politicians to defuse it.
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All set up for The Great Taking - read / watch David Rogers Webb
Unless we can find a way to PRINT money forever, we are in trouble. The U.S. economy is based on buying stuff-- particularly FOOD-- we don't need with money we don't have. Plus, AI will make so many people jobless. We should never have shut down for Covid-- only due to 65% of us who are OBESE-- and now cities are in trouble e as the office buildings are empty -- see 60 Minutes on 1/14/2004. NOTHING good other than Ozempic which will mean that the entire health care system won't collapse but it will also lose paying customers as the majority won't need treatment for so many obesity-related illnesses.