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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 366.07-0.1%Nov 6 4:00 PM EST
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To: TobagoJack who wrote (91162)6/7/2012 9:15:26 AM
From: carranza21 Recommendation  Read Replies (2) of 217561
 
That article has led me to consider the possibility that the huge derivative exposure banks face is simply not real.

No sane banker would expose his bank to the potential liabilities represented by the nominal values inherent in blown up derivatives. No way. It's just impossible to consider unless, of course, there is some sort of implicit deal to cancel these liabilities in exchange for assistance in manipulating interest rates. If they rise, we are screwed. And, as the writer points out, a great many of these derivatives are related to interest rates.

It happened with LTCM, AIG, etc.

The next bubble is the one we can't see: the interest rate bubble. Is it possible that the TBTF banks are not allowed to fail because they are instrumental in controlling interest rates? And their reward are the profits inherent in being able to borrow at ZIR?

Can the powers that be keep interest rates low for an indefinite period of time? That's what it's going to take to avoid a catastrophe.

I wouldn't bet on it. Things eventually revert to the mean.

Great article. I disagree with some of the writer's points, but there is a lot to consider there.
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