Defusing the Derivatives Time Bomb: Some Proposed Solutions
The “protected class” is granted “safe harbor” only because their bets are so risky that to let them fail could crash the economy. But why let them bet at all?
By Ellen Brown / Original to ScheerPost
This is a sequel to a Jan. 15 article titled “Casino Capitalism and the Derivatives Market: Time for Another ‘Lehman Moment’?”, discussing the threat of a 2024 “black swan” event that could pop the derivatives bubble. That bubble is now over ten times the GDP of the world and is so interconnected and fragile that an unanticipated crisis could trigger the collapse not just of the bubble but of the economy. To avoid that result, in the event of the bankruptcy of a major financial institution, derivative claimants are put first in line to grab the assets — not just the deposits of customers but their stocks and bonds. This is made possible by the Uniform Commercial Code, under which all assets held by brokers, banks and “central clearing parties” have been “dematerialized” into fungible pools and are held in “street name.”
This article will consider several proposed alternatives for diffusing what Warren Buffett called a time bomb waiting to go off. That sort of bomb just detonated in the Chinese stock market, contributing to its fall; and the result could be much worse in the U.S., where the stock market plays a much larger role in the economy.
Continue reading here.
Ellen
Just read your Derivatives Time Bomb article. Definitely mind bending to understand the puzzle that has been created but you are making it clearer, thank you. I may be way off base here, please correct me, but I am trying to expand the picture of what would happen.
If I understand it correctly, anything financed by debt is at risk?
So a house that you’ve paid a mortgage on for 20 years with only 10 years left could be taken by Cede and Co as the collateral for the loan, if the bank or mortgage company that made that loan becomes bankrup, Ames Cede exercises their position as legal owner? Same with a business?
If that is true, the reality would be that 90% (I am guessing) of all homes could be taken from the “beneficial owners” and renters as collateral for such failed institutions, leaving the occupants effectively squaters or homeless?
Business CEOs would have a new Board of Directors, appointed by Cede, even if they were allowed to keep their position?
Just as California enacted anti- eviction laws to protect renters during and past the Pandemic, it would seem likely that something similar would have to be done to keep the system going. Just as courts cannot allow a judgment that would cause chaos, even if legally correct, I think the same would apply here.
Perhaps Cede would allow residents to stay put, but now as perpetual renters, rather than beneficial owners, having no opportunity to ever own the property free and clear? Is that what Klaus Schwab means when he says “ you will own nothing and be happy”?
It seems the government would require the collateral owners to keep the system going, keep the corporations functioning, keep grocers and vendors supplying food, but now almost everything would come under a more centralized control, returning much of mankind to the dark ages of Lords, Feudal Lands, and Serfs working for them, with the Cede and Co “knighted” Board of Directors “directing” everything?
While you cannot exchange gold or silver directly at the grocery store, there would likely be a way to exchange it for whatever currency or CDBC that is then the legal tender?
Things owned outright with no debt could be exchanged for gold or silver by private parties. Since it is mostly seniors who own their homes free of debt, they might have an advantage. But inflation and the high cost of maintenance might quickly evaporate their ability to afford the maintenance.
Whew… my brain is tired! Seems the real solution lies above: see Daniel 2:44.
Have a great day
George Cooper
Brown never fails to nail the underlying reason for the threatened collapse of western financial system. THANKS Ellen.