I should add, THAT Bank of America personal story dates about 7 years
ago, when derivatives were about 100 Trillion notional,
10% of where they are today (we are at 1 quadrillion, or 1000
trillion), thanks to all the QUIET BAILOUTS that appeared
ALWAYS near expiration - otherwise a melt would happen.
Liquidity injections tend to take
care of these things automatically via all this complicated
quant math. I guess, this bubble
lately outgrew all liquidity in the World combined. -g-
In my simple understanding of this quant stuff, liquidity
injections tend to reduce market volatility and stabilize the
markets, then they normally like to go up as a result. On
the other hand, free markets are inherently wild, so they
want to do small crashes periodically, which were not allowed.
As a result of such actions of small crash suppression, the
markets get really pissed and then there is a big one coming.
Sorta trivial explanation. Another explanation is that
derivatives offload risk on the system, then it becomes
systemic risk, until there is too much of it. Then eventually
the system can't handle all the risk and breaks down. Quite
an experiment -ng-
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