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The 2 Billion Dollar Loss By JP Morgan Is Just A Preview Of The Coming Collapse Of The Derivatives Market

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When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned.  But the truth is that this is just the beginning.  This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market.  When most Americans think of Wall Street, they think of a bunch of stuffy bankers trading stocks and bonds.  But over the past couple of decades it has evolved into much more than that.  Today, Wall Street is the biggest casino in the entire world.  When the “too big to fail” banks make good bets, they can make a lot of money.  When they make bad bets, they can lose a lot of money, and that is exactly what just happened to JP Morgan.  Their Chief Investment Office made a series of trades which turned out horribly, and it resulted in a loss of over 2 billion dollars over the past 40 days.  But 2 billion dollars is small potatoes compared to the vast size of the global derivatives market.  It has been estimated that the the notional value of all the derivatives in the world is somewhere between 600 trillion dollars and 1.5 quadrillion dollars.  Nobody really knows the real amount, but when this derivatives bubble finally bursts there is not going to be nearly enough money on the entire planet to fix things.

Sadly, a lot of mainstream news reports are not even using the word “derivatives” when they discuss what just happened at JP Morgan.  This morning I listened carefully as one reporter described the 2 billion dollar loss as simply a “bad bet”.

And perhaps that is easier for the American people to understand.  JP Morgan made a series of really bad bets and during a conference call last night CEO Jamie Dimon admitted that the strategy was “flawed, complex, poorly reviewed, poorly executed and poorly monitored”.

The funny thing is that JP Morgan is considered to be much more “risk averse” than most other major Wall Street financial institutions are.

So if this kind of stuff is happening at JP Morgan, then what in the world is going on at some of these other places?

That is a really good question.

For those interested in the technical details of the 2 billion dollar loss, an article posted on CNBC described exactly how this loss happened….

The failed hedge likely involved a bet on the flattening of a credit derivative curve, part of the CDX family of investment grade credit indices, said two sources with knowledge of the industry, but not directly involved in the matter. JPMorgan was then caught by sharp moves at the long end of the bet, they said. The CDX index gives traders exposure to credit risk across a range of assets, and gets its value from a basket of individual credit derivatives.

In essence, JP Morgan made a series of bets which turned out very, very badly.  This loss was so huge that it even caused members of Congress to take note.  The following is from a statement that U.S. Senator Carl Levin issued a few hours after this news first broke….

“The enormous loss JPMorgan announced today is just the latest evidence that what banks call ‘hedges’ are often risky bets that so-called ‘too big to fail’ banks have no business making.”

Unfortunately, the losses from this trade may not be over yet.  In fact, if things go very, very badly the losses could end up being much larger as a recent Zero Hedge article detailed….

Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least “net” is not “gross” and we know, just know, that the SEC will get involved and make sure something like this never happens again.

And yes, the SEC has announced an “investigation” into this 2 billion dollar loss.  But we all know that the SEC is basically useless.  In recent years SEC employees have become known more for watching pornography in their Washington D.C. offices than for regulating Wall Street.

But what has become abundantly clear is that Wall Street is completely incapable of policing itself.  This point was underscored in a recent commentary by Henry Blodget of Business Insider….

Wall Street can’t be trusted to manage—or even correctly assess—its own risks.

This is in part because, time and again, Wall Street has demonstrated that it doesn’t even KNOW what risks it is taking.

In short, Wall Street bankers are just a bunch of kids playing with dynamite.

There are two reasons for this, neither of which boil down to “stupidity.”

  • The first reason is that the gambling instruments the banks now use are mind-bogglingly complicated. Warren Buffett once described derivatives as “weapons of mass destruction.” And those weapons have gotten a lot more complex in the past few years.
  • The second reason is that Wall Street’s incentive structure is fundamentally flawed: Bankers get all of the upside for winning bets, and someone else—the government or shareholders—covers the downside.

The second reason is particularly insidious. The worst thing that can happen to a trader who blows a huge bet and demolishes his firm—literally the worst thing—is that he will get fired. Then he will immediately go get a job at a hedge fund and make more than he was making before he blew up the firm.

We never learned one of the basic lessons that we should have learned from the financial crisis of 2008.

Wall Street bankers take huge risks because the risk/reward ratio is all messed up.

If the bankers make huge bets and they win, then they win big.

If the bankers make huge bets and they lose, then the federal government uses taxpayer money to clean up the mess.

Under those kind of conditions, why not bet the farm?

Sadly, most Americans do not even know what derivatives are.

Most Americans have no idea that we are rapidly approaching a horrific derivatives crisis that is going to make 2008 look like a Sunday picnic.

According to the Comptroller of the Currency, the “too big to fail” banks have exposure to derivatives that is absolutely mind blowing.  Just check out the following numbers from an official U.S. government report….

JPMorgan Chase – $70.1 Trillion

Citibank – $52.1 Trillion

Bank of America – $50.1 Trillion

Goldman Sachs – $44.2 Trillion

So a 2 billion dollar loss for JP Morgan is nothing compared to their total exposure of over 70 trillion dollars.

Overall, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives.  That is approximately 3 times the size of the entire global economy.

It is hard for the average person on the street to begin to comprehend how immense this derivatives bubble is.

So let’s not make too much out of this 2 billion dollar loss by JP Morgan.

This is just chicken feed.

This is just a preview of coming attractions.

Soon enough the real problems with derivatives will begin, and when that happens it will shake the entire global financial system to the core.

  • Paranoid

    Ah yes; A few billion here a few there soon you will be talking real money. But that’s the problem you aren’t talking real money. They don’t know what real money is these days it’s all computer blips; until it isn’t then we are all in real trouble

  • Lakeside

    There won’t be anything left of this country but bones & feathers when all the crooks get through having their drunken, maniacal financial orgy!

    • michelle

      not true. There will be just as much food, fuel, houses, clothing, ipods, etc.

      We will have t go back to a “real” economy, and people will not be so ready to give up their financial sovereignty to banks again.

      Competing currencies, barter, PMs, etc, will take up the slack for those who produce real goods and provide real services.

      For those who don’t produce real goods or provide real services, things will be difficult indeed.

  • Washington

    Time to End the Fed? The Origin of Central Banking and Possible Alternatives!

  • NickelthroweR

    Yes, but for those bets to be paid on a “credit event” has to be declared. Wiki describes it like this: For most commonly traded Reference Entities in Credit Default Swaps a Determination Committee will decide on exactly if and when a Credit Event has occurred, and their decisions and announcements are posted on their website:

    We saw with Greece that giving investors a 70% haircut was NOT considered a credit event. If Greece is not a credit event then what is? I can only imagine that incredible amounts of pressure are being put on the ISDA and a major credit event will be unlikely as it really is a weapon of mass destruction that takes the whole financial world with it.

  • Gary2

    Michael–would it be true that if jp tbtf lost 2b then someone else made 2b?

    The whole financialization of the economy is itself a huge risk.

    • Michael

      Yes, derivatives are a zero-sum game so there were definitely some big winners out there from all of this.


      • Icedmochanut

        I wonder who were the winners?

        • *** Deutsch Bauer

          Its a shell game like an pool shark let one win to line up more suckrs
          take there money.Oh one that wins is also in on scam.

  • K

    Another well researched article. While many of you were watching this story. I was watching the market only lose about 34 points. Further proof to me that the market is totally manipulated. Before computer trading, and some other little games they can play. Today would have been at least down 100 points. There is nothing real about the market anymore.

    • 007

      Agree, Bernanke is behind the curtain buying stocks and propping up the market. In the past, the market would tank on such bad news. Now as soon as it goes down 100 or 200 points mystery buyers appear. God help us all when the Fed decides to quit buying. It’s kind of like playing musical chairs. Don’t get caught in the market when the music stops.

    • uncurable wound

      K Spot on, Im in these markets every day as a small guy.Very hard to maneuver in this PPT,computer controlled world…In fact Im about done,way to rigged!

  • William

    When the derivatives market starts to implode it will set off a chain reaction of losses and will wipe out the entire economy. Add to this the combined debt of all nations. On top of all these problems that have been done on purpose, we will all be pushed over the cliff and global war will ensue over what resources are left. We are at the end of time. People who read these comments already know this. PMs, food, pay off debt, and hold on tight.

    Good luck all.

  • Antonio Gonzalez

    Lie….lie….lie……and more lie. Wake up americans.

  • old soldier

    If the losses go from bad to “…very very bad”, then what?? I don’t really understand derivatives, but it does sound bad. The BIG question, to be asked, at least by me, is what do we do ….if things go from bad to worse.” I admit I am very concerned.

    • John W.

      Think of a derivative as a car title loan. The problem is they use one car to derive the value/security to make a hundred or a thousand car title loans. There is only enough value to secure one loan, no problem as long as no one defaults on their loan.

  • J

    SEC Employees watching porno while the financial market crisis was occurring. This is just embarrassing. They are suppose to be the watchdogs of the national financial markets, and they are not doing their job. These Wall Street mobsters are gambling everything they could get their hands, from mortgages to pension funds. You can’t trust the government to protect the citizens. It’s just the fact. The people of this nation needs to wake up, and understand what is going on.

    The OWS needs to blame not just Wall Street, but the federal government for implementing so many rules that it makes it harder to create a free-market capitalism and the middle class to achieve higher living standards.

    • Highspeedloafer

      OWS will never blame the federal government because both are hoping for the demise of free-market capitalism.

    • Snow White

      That’s largely the problem. They occupy Wall Street and not the Capital or Penn. ave, where the blame really lies. If someone opened Fort Knox and told you to take whatever you wanted, what would you do? The occupy crowd are more concerned with someone giving them a house or forgiving their student loans (which they lined up to take out).

      The losses at JPM (so far) are not huge when taken within the scope of the size of the U.S. economy (the size of which is inflated), but the panic they can cause could be.

      The whole “finiancial services industry” is a fraud.

  • Rodster

    Fitch downgraded JP Morgan.

    • Saq

      Poor JP Morgan. Boo *************************** hoo

  • Mansoor H. Khan

    Here is how the bankers’ game works:

    mansoor h. khan

  • McKinley Morganfield

    “… somewhere between 600 trillion dollars and 1.5 quadrillion dollars.” All I can do is smile. 🙂 This is an absurd, though probably more or less accurate, figure. Its like talking about 100 trillion in unfunded social security and medicare liabilities coming due in 20 years; anyone who thinks this can be rectified is an idiot and/or conniving charlatan. Reset time approaches. Prep as best as you are able because TBTF will fail. After all, Michael doesn’t call his blog theeconomiccollapseblog for nothing.

  • Steve

    Why should I kill myself and pay off all debt?
    My student loans about killed me. Shouldn’t I just pay minumums, declare bankrupcy when everything goes bad. Then keep the cash??? Im my pocket. And come out on top?

  • nowwthen

    Another informative article that’s worth passing around. Plenty of facts without the partisan bias you get most everywhere else. Amazing how quickly you can research and put these things together.

  • The International Monetary Fund. was the big winner. The $2 Billion went into there holding account. To bail out the Euro

  • tappedops

    Dont panic yet… when a box of mac-n-cheese costs what your paying for gas right now—panic! and dont forget to get out of the big 6 by the end of june…

  • ken nohe

    “Loosing 2Bn on a hedge” is an oxymoron. It is impossible! You hedge a position to reduce your risk and therefore a hedge, a real one, will be “in the money” if you lose on your position or cost you the hedge price if you make money on your position in which case you do not really care. This is basic derivative knowledge.

    JP didn’t “hedge” anything. They took a gigantic, probably naked position and could not unwind it. They still can’t.

    The only solution to that is extremely simple: Reenact the glass steagall act immediately! Banks and financial institutions are not the same and should not be treated similarly. Banks take deposits and make loans and must therefore be conservative because it is not “their” money that they are investing. Investment bankers can and should be able to do anything they want. They take risks and have a role in the financial system. But they also must be allowed to go under whenever their bets go wrong without major consequences for the rest of us. (Conversely, they can get very rich when they “win”.)

    The merger of the two functions has created an “instability” in our economic system that is becoming critical. It does not have to be so. It is a choice made by default by corrupt politicians and an ignorant population.

    Paradoxically, bankers have created the perfect “hedge”. By taking all of us on their ride, the size of their bets do not matter anymore: they never loose. If we do not find a way to end this soon enough, then yes the consequences may be catastrophic. But again, it does not have to be so!

  • Erin

    /pours herself another stiff drink while making a mental note to pick up more canned food and bottled water when she’s sober.

  • Alasha

    What is stunning and mind blowing to some apparently barely makes a blimp to others… 37 point drop in the Dow and headlines about Gay Marriage…. mmmmm


    • Michael

      I depends how big a crash we are talking about.

      A full scale crash will be too big for anyone to clean up.


  • mondobeyondo

    The derivatives market bubble is going to pop very soon. Just like the dot com bubble, the housing bubble, and so forth. And when the derivatives bubble does pop….

    umm… there will be no words to describe it. Financial nuclear holocaust comes to mind.

    • Josh

      I have been reading about the “popping” of the derivatives bubble for years. What is going to make it “pop”. Any signs we should be looking for?

  • mondobeyondo

    To the folks at JP Morgan: Try hitting the slots at the Bellagio casino in Vegas. Their payout is really good. Table games are riskier, but I’d recommend craps, blackjack and poker. Not that I’ve ever won anything big in that.

    Stay away from the roulette table! Betting on numbers is extremely risky. But you already know that…. hee!!

    • Michael

      I am amazed at how many people just love to go to the casinos. Most of the games do not even appear to be much fun. But people are addicted to them anyway.


      • Rodster

        Yeah me too. I’m glad I fail to see the fascination in gambling. I’ve never been to LV and have no desire to go there. I don’t even refuse to play the Lotto.

        I’ve heard of too may people getting addicted to gambling. I figure with the money I save not gambling I can spend it on necessities.

  • Georgiaboy61

    Concerning the folks at JP Morgan, well, the old saying applies… “live by the sword, die by the sword”… the only trouble is that Joe/Jane Sixpack are likely to be on the hook in the end, for their losses via more govt. bailouts (aka welfare for the rich). As long as government allows the big finance firms to socialize losses and privatize gains, repairing the damage to our economy will be impossible.

  • Sam

    Thank you Michael for your informative articles. It looks like we could see a financial crisis this summer like in ’08, but who knows what will happen. It is a bad idea to keep money in these banks. If there is a run on the banks in the event of economic collapse and a bank holiday is declared then people could end up lose their entire savings. I just read an article saying more Americans are withdrawing their money from the banks and keeping it in their homes.

  • Farrell

    Yes, it’s true that JP Morgan is nothing more than a casino.

    But the casino management always gets their bonuses and I bet the bonus will be passed out at JP Morgan as well without regard to such losses.

    Any one want that bet?

  • rjw256

    Most banks are insolvent. One event big enough to light the fuse, is all it will take. And consider this, when interest rates go up which they will, many banks will go pop. The recent bank stress tests did not include the possibility of rates hikes. How dumb is that?! All the talk about how well the American banks are capitalized is meaningless, they still have too much toxic debt. Gambling greedy morons the lot of them.

  • Why the derivatives market will blow up

    One assumption that financial economists make in their mathematical models is the concept of independence. People don’t influence each other. Things happen independently. It ignores the concept of herding, common in financial markets. They do this to make their model tractable. It works most of time, until it doesn’t. Some event comes along that makes people herd, blowing up derivatives models.

    Another assumption is that market trading is continuous. In real markets trading might not be continuous with large discontinuous jumps in trading in extreme circumstances. This means real hedging breaks down as traders cannot follow the market.

    The bottom line: The derivatives market is a bomb waiting to blow up.

  • Paul

    If JP Morgan lost those 2 billion, who won them?

    • John W.

      Somewhere down the road JP MORGAN will beat someone else out of two billion bucks. Maybe the same party that they lost to. Then again maybe the loss never really happened. It’s one hand washes another now that the govt. is totally in bed with and controlled by the big banks.

  • blueridgeviews

    What are derivatives and how can they be more than the world’s GDP?

  • Paul

    All the money in those derivatives markets does not really exist.

    It comes into being, if someone wants to trade these papers into gold or other physical goods. Anybody who buys that stuff from his hard earned fruits of labour will be the loser.

    That’s the main reason the gold price shoots up. Financial magicians create money out of nothing and then pay any amount of those bubbles for a piece of gold.

    The real loser is the small guy who sells his house and his soul to get a piece of gold.

    Apple shares are totally useless, for example. They don’t even pay dividends. And they trade much higher than their nominal worth. It’s just very expensive wall paper everybody can perfectly live without.

    If you want to invest in your future, invest in your children. Not just into “prestigous” education and “brand name” clothing, but especially time and closeness.

    They only grow up once. When I visit my nieces and nephews I take up any opportunity to play with them when they ask me.

    And with them and with my parents nothing is more important than listening to them. All that timespend with the family cznnot be replaced by anything else and cannot be done later. Parents die, and children are adults later.

    Although we live in very different parts of the world, we are very close together. And we are ready to come to each others rescue at the drop of a hat.

    What else do you need?

  • Dan

    I’m tired of reading “the American people need to wake up”. Many of us are awake, now what?.

  • chiller

    If you really dislike the corrupt financial industry, switching to a credit union is a good start but is pales to stopping your 401k contribution. “Oh, but my employer contributes X% and I don’t want to lose that!” Fools, it’s already lost as well as your 401k balance PLUS you keep contributing to the same financial institutions you claim to hate!?! You continue to ‘feed’ these crooks your hard earned money each and every week yet gripe about what they’re doing with with it. So stop talking in circles, knock of the hypocrisy and STOP your 401K contribution. It only takes a couple minutes on-line and you’re done.

    • Agreed Chiller! When the economy collapses, paper assets will be worthless. IRA’s, 401k’s, stocks, bonds, even cash, will lose their value.

      Invest in silver, gold, food, water, guns, ammo, lights, fire sources, heat sources, etc.

      Get your savings out of bank accounts and safety deposit boxes, because you may not be able to get it out when the collapse happens.

      Move your accounts from their banks to credit unions and independent banks.

      Stop buying from Walmart China factory outlet and start buying from your local farmers and ranchers, because you’re going to need those relationships in the future, when the food supply shuts down.

      Once the collapse happens, it will be too late to prepare. We’re in the calm before the storm. Take action now to protect your family.

    • xander cross

      I agree with you all the way. I have been saying this for many years and yet, people continue to do so. Hyprocrites.

    • Save the Republic

      Already did that 1 1/2 years ago. I don’t want them having any of my money for any reason. When this thing crashes, the people who have their money in will lose not only their matching contribution and gains, but they will lose the money they earned and contributed. And guess who will be getting their money? It will once again be the ones who caused the crisis. It’s bad enough when they’re screwing you, but do you really want to pay them to do it?

  • Evie

    Another way the elite privitize gains but socialize losses. They would have you beliebe entitlements are the problem. They are just more of the money you have earned they want to gamble away. Money does not disappear to money heaven. They never seem to lose any of their own. Yet we are taxed to the hilt and yet the gov. Is broke. My uncle made $200,000 ayear and spent all of his money at the casinos too.

  • asd

    When the derivatives market starts to make a sound, you have a little while to get out and prepare for the worst.

  • Jodi

    I wouldn’t be surprised if our economy gets real dicey before the elections.

    • I guess that depends on who THEY want to win the election. THEY being the shadow government that controls this country.

      If they want to keep Obummer, then they will protect the economy until after the election. If they want Romney, then they will will let it ‘get dicey’ to make Obummer look bad.

      It will be interesting to see how it plays out. 😮

      • Jodi

        Makes perfect sense, for as long as I have been preparing for the worst…I’m extremely nervous about how all of this plays out.

  • Work.Buy.Consume.Die.

    Smoke & Mirrors. All of it. The Corporation of America has used and abused it’s ’employees’ for decades. Check the status of the elites/wealthy leaving the BRA. Game over. Exit stage right….

  • Work.Buy.Consume.Die.

    P.S.: Eduardo Saverin [Facebook] is a pefect example of money class leaving. Watch the vultures go after his money.

  • This whole derivatives mess is one of those things that does not get reported in the mainstream media very often, and when it does, it is usually not explained in a way that most people can understand. Because of the incredible amounts of “notional” values involved and the high leverage, it has the potential to be the metaphorical first domino that sets off the chain of events leading to economic collapse in many areas of the world. What remains to be seen is exactly which bank or other financial entity will topple first and get the ball rolling.

  • Gary2

    Here is one thing we can all agree on: No more bailouts for the banks and the Too Big Too Fail Are Too Big.

    • John W.

      We all agree. Sadly we are all no bodies that no one gives a crap about as far as what we think.

    • Rodster

      Wow a first time agreeing with Gary2 or maybe he’s agreeing with us. The problem now is because the Fed created this monster. If you now cut them off, there is a HUGE risk they’ll collapse and it could set off a cascading domino effect and more world banks could collapse which in turn could throw the world economies into a free fall.

    • Save the Republic

      When we can all start agreeing on things and being unified is a sign that we have truly woken up. It means we are finally focusing on the things that we should be, the things that adversely impact us, the 99%. If they aren’t dividing us, then we must be on the right track!

  • markthetruth


    Your wrong, derivatives are not a zero-sum game . They as in like i said before in theory(yes) money is not created it is transferred from one person to another. The ponzi scheme will be the biggest benefiter . But when we start printing money , and giving loans to someone who can’t afford but inflate his numbers so he can it is not because there is now fiat money in the so when it ends someone with have out printed the other one . Now you have cheated and destory everybody else’s lives , who kill themselves , murder , starve . How is playing with peoples lives a zero sum game.

  • Today’s spate of media establishment hand-wringing, morning-after articles supposedly analyzing the current economic crises all miss the simple fact that we are at the tail end of the chimerical post industrial/consumer society hoax. The build up over some fifty years of ruinous speculative forms of illegitimate debt, a.k.a. derivatives securities, is like a terminal cancer on our system. The Federal Reserve and Treasury’s bailout mania has only worsened this monstrosity by feeding that cancer… The only solution is to cut loose this muti-trillion anti-productive succubus in a similar fashion to what FDR did. First we must re-enact Glass Steagall and let the so called financial houses on Wall Street choke on their useless gambling derivatives. Secondly the government must issue credits to be used in physically productive, high technology, long term investments. That is the only basis upon which our nation will ever return to prosperity and a decent future.

  • Brian


  • Brian

    slavery is making a come back

  • Peas and carrots are up, tomatoes sets planted, potatoes and corn in,,,and the list goes on. One can sit and grumble about money but when it starts to show billions, you know more losses are on the way,

    Stock up.


  • Well, derivatives are supposed to be “off-setting” – if you bet one way, then decide to ‘cancel’ because market conditions change, you buy another ‘offsetting’ contract, hence the HUGE ‘notional’ value of $600T-1.5Q…but most of these SHOULD be cancelled out by other contracts with a net result of zero.

    However, this does not account for ‘counter-party’ risk, if even a handful of counterparties screwed up and cannot make good on their contracts, this could lead to a domino effect of inability to pay on their derivative contracts.

    So, if we assume just 5% counterparty risk, the 200T of the TBTF would be $10T…even a 2% default sould be $2T…Game Over

  • Yea take the lollipop out of my Grandkids mouth to pay for of this mess, when EVERYTHING else is gone, they will come for that too…
    See how to survive the coming Economic Apocalypse…
    DO NOT (just) buy Gold & Silver as YOU CAN’T EAT GOLD and SILVER WILL NOT KEEP YOU WARM & Diamonds and Platinum will NOT protect your family.
    See a Serious and Real FREE survival plan for you & your family at:


    What is happening in America? Obama to bring foreign troops into the United States we learn that 30,000 Russian troops are coming to the United States. We also learn that number maybe near 100,000 by November of this year. Why?
    Henry Kissinger who was speaking at a meeting at Evian, France, on 21 May 1992 Stated.
    Today Americans would be outraged if U.N. troops entered Los Angeles to restore order; tomorrow they will be grateful. This is especially true if they were told there was an outside threat from beyond, whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will plead with world leaders to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well being granted to them by their world government.
    The planned reelection of Obama may become revolutionary style. Obama’s administration, including his czars and his closest Progressive supporters, are planning a manufactured insurgency against America. Using the media to garner both sympathy and support for his unfinished goals.
    The Department of Homeland Security, which is effectively under the control of Obama is actively preparing for massive social unrest inside the United States. This can be seen in DHS ordering 450 million rounds of Ammunition. These Russian soldiers in the United States will be training with and carrying American equipment. Don’t think for a minute that the administration is doing anything to stabilize the chaos fixing to break out in our country. There’s a revolution fixing to happen in the U.S. Economic chaos, chaos through racial division, and chaos through class division. Obama is at the core of these problems and plans to use them to stay in office. The Trayvon Martin case is just the tip of the iceberg.
    The aspect of suspended elections won’t look so surreal when you see what is fixing to take place. “The end-game plan for America is its destruction as a Constitutional Republic, with the assistance of the agencies under the umbrella of the DHS.” The threat is not from beyond our country, but the threat is the beliefs of some of our Congress and our Presidency. Russian troops in the United States. WHY?

    • Agreed, and as you can tell, no one even wants to touch this because it’s so undeniable.

  • Old Man

    A Goldman Sachs-JP Morgan press announcement in 2013:

    Today, we announce a lost of $33.873 trillion dollars in our derivatives operations. Clearly this wipe out our combined balance sheet. Therefore, according to US laws and Federal Reserve rules, an amount of $40 trillion will be transferred from the government to our banks, so that we can continue to operate soundly, and that no bank run will occur. The credit rating of the U.S.A. will be negatively affected, likely to JJj. People will be asked to sell all of their assets and pass the receipts to the government as a one-time donation.

    This affirms why our banks are called Masters of the Universe!

  • pegleggreg

    excellent essay. Will the government bail them out again? I hope not.

  • Washington

    May 10, 2012 by NAGRstaff Kelly McMillan, Director of Operations for McMillan Group International speaks to NAGR Executive Vice President Dudley Brown about his recent encounter with anti-gun Bank of America officials who told him to take his business elsewhere.

  • mhamilton

    Our political leaders crave the money the banks give them . So the voice of the people mean very little. There will be no change , the anger of the people will grow . So what will be done ? Nothing , read Weimar Germany 1923 ( When Money Dies) , they had one disaster every week . Only to be surpassed by the disaster the next week . These will become commonplace . Brace yourself folks , Mr Toad’s wild ride is just begining.

  • DMyers

    Reference Gary2 and reply by Michael. Zero sum? Theory?

    William (above) posits that the derivatives market will implode causing a chain reaction of losses that will bring down the economy (world economy, I presume). The zero sum “theory” would seem to protect us from William’s dire scenario. All losses to one are offset by gains to another, right? Sounds like an unsinkable ship. On second thought, it sounds more like a gambling casino.

    Modern civilization, in all of its abstract glory, could crumble immediately back into the Stone Age in a couple of ways: (a) the failure of access to constant electricity and (b) the complete failure of fiat currencies from a last ditch effort to bail out “the house” at the derivatives casino. Anybody want to make a bet?

    • Michael


      Well, it is a zero sum game as long as all bets can be paid. When the bets can’t be paid anymore everybody loses.



    Fox news had a guest commentator on today (May 12th), who claims that the 2 billion loss by JP Morgan is not going to effect our economy and that the media is over blowing it.

    He goes on to say that 2 Billion loss is balanced by many billions of gains JP makes and that the loss is a once incident only.

    Whose cool-aide are they drinking?


    Stunned my ass.

    This play has been scripted since Allen Greenspan of the Federal Reserve Bank was beating the drum for the creation of this insanity years ago. The entire cast should be in orange jumpsuits and instead of reviving the Volcker Rule they should be invoking the R.I.C.O. ACT. This is a criminal syndicate who have financially sodomized the entire planet in one of the worst periods in history of mankind.

    Follow the link below to get all the money back, attach all of the assets from the criminal banking cabal, throw them all off the bus and into jail where they belong;

  • Ed_B

    My thought is… How do we know that JPM’s losses are “only” $2B? Because Jamie Dimon says so? PFFTTTT! These losses could just as easily be larger then $2B… a LOT larger… like $2T, maybe more.

  • nepenthean

    Lindsey williams said when derivatives come up in financial news, the end is nigh.

  • pierrot

    Are you shure its a derivative trade problem ? Could it be a gold naked short sell that was called for delivery ? Emptying their vaults is a good way yo stop those vampires ! That’s what seems to have happened to UBS !

  • “mind-bogglingly complicated. Warren Buffett once described derivatives as “weapons of mass destruction.”
    I believe Buffet, the govt. mooch, Fed. Lover ,corporate welfare king ,said
    “weapons of FINANCIAL mass destruction.”
    When will all the derivatives collapse?
    I would of thought by now.

  • davidmpark

    This is how I learned what derivatives are: Fed/Res cuts inflationary checks to a few major banks to ‘stimulate’ the economy. Those banks then loan out the money to smaller banks to the tune of 10X the original amount from the Fed at a low interest rate. Those smaller banks then loan to institutions and even smaller banks for about 5 – 10X more than the principal amount from the larger banks. Those banks then loan out the extra-inflated inflationary dollars to Main Street in the form of mortgage and car loans.

    So, a $5,000,000.00 stimulus check from the feds gets loaned out about 20X what it’s worth ($100,000,000.00) on Main Street. That paper is then packaged and traded as securities instead of the super-major-high-risk speculation that it really is.

    Unlike Mortgage-backed securities, derivatives can be anything that is owed money. Collecting on that debt is crucial to the derivatives market – that’s why defaults are so nasty to go through. Just a few upsets the market as a whole; they were loans based on super-inflated capital that the bank never really had.

    With many people now defaulting on student-loans, mortgages, car loans, credit cards, etc., then it’s no surprise that JPM had to cover those losses from somewhere else.

    And to make matters worse: if those banks default, then that means the super-inflated money is exposed; and banks that hold the derivatives in that bank, or derivatives in the form of loan securities, have to call in the loans or repossess quickly in order to cover their rear-ends. So, if you have a $17,000 car loan from bank A and bank A goes under a few months later, then bank B that holds the loan as a derivative, will call in the remaining balance within the month… or just repossess the car the following day. They have that right. Same goes for ALL derivatives – if you are in debt; you can lose everything!

    That is why it is CRUCIAL to get out of debt ASAP! Also to prepare quickly for what is coming. From what Mike and others are deducing, this is deadly serious.

    • Ian

      The bank can’t recall your entire remaining balance, by a simple whim. You have a contract and they have to abide by it.

      Some debt is good, for example when you buy money making properties with borrowed money. The property only appreciates, while the debt becomes smaller and smaller due to inflation.

      In fact, that’s how businesses took advantage of the period of hyper-inflation during pre-hitler germany. Businesses would buy supplies in today’s monetary unit, and pay off the loan in hyper-inflated monetary units next month. They actually did pretty well.

      Landlords got hit because of price freezes though.

      • davidmpark

        Not entirely true about the contracts. Since the contract was made with bank A, and bank A went under, then it’s up to bank B on what to do. Since bank B could be a loser with a bad asset not backed by bank A anymore, then they have to cover their rear-end somehow. It’s all in the banking codes; not easy to find on the internet but when you’re there – it’s a scary place to roam.

        Debt is good when the monetary system is good and you already have the savings and securities such as precious metals, commodities, cash reserves, CD’s, treasuries, money market accounts, etc. to cover the debts (mortgages don’t count – that’s where you live.) Right now is not a good time to have debt. It will get you if you don’t have anything to back it with independently of your living needs and paycheck that isn’t in paper form.

        And from what I read about the hyperinflation in Wiemar Germany, Yugoslavia, and Zimbabwe; businesses that relied on the marketplace were forced to close by the bad economy. All those who operated in the underground economies and the black markets (yes; there’s a difference) did alright because they could be flexible with bartering and gold-based capital.

  • Chicken Little

    “The sky is falling, the sky is falling!”

    Once Greece goes belly up, followed by Italy and Spain, the EU will be in real trouble and the dollar will actually be strengthened when viewed as the safest currency. Rents in the U.S. are higher than the same square footage under mortgages (without the tax breaks). So, eventually the market will recover once banks and companies quit hoarding their cash and young people realize it might be cheaper to own a house than to rent an apartment..

    • Nexus789

      Pointless comment. The financial system will fail systemically. The US debt driven consumer model is a failure. The banks will fail before they ever get rid of the cash they have horded and as for people buying a house and entering into 25years of debt servitude forget it. The US will be like Japan (if the Yanks don’t start another pointless and stupid war) with property stagnating for a decade. The amount of shadow housing inventory held by the US banks is massive.

      • mike james


      • lostinspace


    • Art

      Dear Mr. Chicken Little,

      I am willing to sell you a $150,000,000,000,000.00 certificate for 3 pounds of Organic Chicken Feed. Your discounted price is $3.00 for each certificate. This is a great deal, because you will save $49,999,999,999,999.00 per pound. I have more certificates, so tell your friends that rich opportunities await them.


      Mr. Wolf

      P.S. Did you work with Pavlov?

    • Debbie Joann

      Chicken Little: I hope you are right. I am not a financial expert but I wonder if recovery of the housing market coupled with a strong dollar will be enough to avert what many think is an impending depression. I keep reading news stories about housing market recovery but don’t actually see anything to back it up. On the other hand, the house next to mine just sold for one third of the amount my house was tax appraised at 4 years ago after the bubble had burst and house values were declining.

      • Art

        Dear Debbie Joann,

        Read Nexus789’s reply to Mr. Chicken Little. Enjoy your home. Can you say, “I am a Mozambique millionaire”? $1 US Dollar equal $27,400.00 Mozambique Dollars. If you are curious, research “Fiat currency”.

        Best wishes for a happy Mother’s day.


        Mr. Wolf

        P.S. Did you work with Pavlov?

    • David Gurney

      Why does Michael allow Real Estate shills on his site?

    • madmarc

      Blah blah blah. Interesting, but I’m not holding my breath anymore. The doomsayers have been predicting the end of the financial world, and its still here. sure, its coming. Prepare as best you can, but I think I’d rather continue living and enjoying my life than hunkering down in the mutant proof bomb shelter, waiting for the end.

    • DaveP

      Problem with the dollar rise is that unemployment will increase as international exports will fall …because the dollar is stronger.
      It is the stated position of the US to pursue a weak dollar policy in order to stimulate growth at home…
      Any rise in dollar strength will be met by more quantitative easing to debase the currency.

  • Great insight Michael. You don’t this kind of info through the Lame Stream Media.

    No doubt this will lead to calls for more reform and restrictions, which is a waste of time, because the whole system is corrupt.

    During a partial audit of the Federal Reserve, the Government Accountability Office found that between the period of December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments, with a total of 16 Trillion Dollars.

    During that time, JP Morgan received $391 billion from the Federal Reserve.

    Too big too fail banks like JPM and HSBC have been artificially manipulating the price of silver and gold,, and ultimately will lead to the biggest financial disaster in the history of human financial civilization.

  • Wow! When I was growing up, a million dollars was a whole lotta dough!
    Later, ‘billions’ was the buzz word. Man-oh-man, BILLIONS!
    Not any more. Now ‘trillions’ is thrown around as though it were nothing.
    Let’s face it, trillions is beyond our conception, beyond our belief, beyond
    repayment. It ain’t gonna happen. Quadrillions, you say? (See: Japan national
    debt). Oh please, like, that’s not gonna get defaulted on?

    Yeah, let’s just ‘print’ some more ‘trillions’. Ya know, the ‘Trouble with Trillions’
    (See: Star Trek) is they just keep multiplying faster and faster like, well, rabbits,
    and Tribbles, and before you know it, it’s just impossible to keep track of it all!

    • mondobeyondo

      Trillions are the new million. You won’t be rich in the future, unless you’re a trillionaire.



  • DOD

    You will be surprised how long the oligarchs can kick the can.

    The crash will be executed perfectly when that time comes. They are just conditioning us and perhaps making accommodations to our FEMA camps.

  • Frank

    Reading this you HAVE to be aware of how precarious your individual situation is. Highly recommend becoming a prepper now. It might not work, but ya gotta try to survive the economic collapse that is obviously, definitely ocming.

    • Paul

      Frank, What can one do in the way of prepping? I really don’t know of any good options.

  • Kim

    I still don’t get it. What do they bet on?

  • Nexus789

    The financial services industry should never have been deregulated. This is not going to end well as there is no international consensus to address the problem in terms of a global debt purge – this would obviously impoverish the bankers and bank shareholders but who cares. The bankers have trashed the world economy and financial collapse at some point in the future.

  • mondobeyondo


  • erheault

    The moral to this story is cover your asses as much as possible as the fan is about to get hit with a huge load of defication, Oh and be sure to vote for zero he will be our saviour all we have to do is ground Air Force one.

  • Hey its NOT REAL MONEY it’s just dots & dashes on a computer somewhere,
    so if it’s 10 billion or 100 billion what’s the big deal????
    IT”S NOT REAL MONEY, it’s just a figure on a computer screen.
    Don’t worry about it. Go back to sleep!
    What flavor Koolaide are they serving in the soup line today???
    See a Serious and Real FREE survival plan for you & your family at:

  • Debbie Joann

    JPM’s loss of $2B+ provides an opportunity for everyone to see that not much has changed in the financial services industry in spite of the 2008 financial crises that we are all still living through. Check out this investigation into Lehman’s bankruptcy:

    I naively thought these fraudulent activities were a thing of the past but JPM’s loss is a clear indicator that Wall Street is continuing with business as usual. It is entirely possible that things can go bad again.

    • MountainHiker

      As long at they use the taxpayers money to bail out this bunch of crooks, they have nothing to lose, no punishment for failure….

  • Barn cat

    When the derivatives market crashes the Fed will create as many dollars as necessary to stabilize the world’s banking system. That means the dollar will be instantly worthless. Imagine waking up one morning, seeing the news, and gasoline is now $1,000 a gallon if paid in currency. But only 20 cents if you pay in 90% silver US coins.

  • Washington

    Mozilla is first major tech company to denounce CISPA While most Silicon Valley companies are keeping quiet about their thoughts on the cybersecurity bill, Mozilla speaks up. by Dara Kerr May 1, 2012

  • MountainHiker

    There are estimated to be 10 million homes for sale and over 11 million homeowners holding onto
    upside-down mortgages. Ever wonder what will happen when banks get back to foreclosing and start dumping houses again?

  • Evie

    What do they bet on? That people will not pay preditory loans.

  • Bail them out again!

  • Jerry

    Collapse is on the way.. Any one with a brain should be able to figure out what is happening.
    You can’t keep spending and printing more money and hope that everything will turn out all right.

    We are seeing the beginnings of what I never thought would happen in my life time.

    Are you prepared for what is about to come our way?

    See what one millionaire has said about the economy and how you can prepare
    for what is bout to happen.

    Most people are going to be caught without clue as to how they got in the situation they
    are in.

    Make sure you prepare and are ready for what is to come.

  • Gary2

    I’m a big believer in capitalism. I’m also a big believer in

    They each do one thing, and only one thing, without concern
    for anything else.

    When controlled properly, they both offer enormous benefits.

    When uncontrolled, they consume everything in their paths
    leaving behind nothing but scorched earth and ruined lives.

    The difference is that no sane person spends a moment arguing
    that we should remove the controls on fire, or idolize and reward arsonists.

    from a comment on the On Point radio blog.


    The biggest lie about the financial crisis is that it is too complicated for ordinary people to understand. The whole point of the financial crisis is that it is all about fraud and nothing else. It is about the fact that it seems that no one in this asylum state wants to put in an honest days work for an honest days pay. No one wants to run an honest business to create something useful. Everything is about shortcuts and wild speculative bets. Only an idiot could see a world economy that at max, produces 60 trillion a year in GDP (assuming that this is even true) and then look at 1.5 QUADRILLION in derivitives (not backed up by any tangible assets) and not know that there is nothing but fraud and theft going on. Anyone who believes this to be an honest system needs to put in a bid for my oceanfront condo in Arizona……..

  • Johnney Rotten

    If only the general public knew that Rome is burning all around us in all the financial markets sectors we could make a plea bargain to the political powers to do something. Returning to Glass- Steggal Act is something worth considering. Some of the blogs on here adhere to the bailout method forever. This is not working but making the situation worse. We are in for a long hard ride America. Hold onto your saddle because this is going to be a rough one on the long slide down the hill to financial ruin. The point is this administration is orchestrating this. The Chinese are now going to set up shop as US Banks and the currency of the country will be recognized on world markets. What is Timothy Gietner thinking? Why is he doing this? To support the rapidly deflating value of the dollar? To make good on increasing the debt limit. I think both.

  • I am Tyler Durden’s contempt for the system

    “when the music’s over, turn out the lights.” -The Doors

    Someone didn’t turn out the lights, but the music that is fiat currency, capitalism based on it and insurmountable debts is O-V-E-R…

    Get ready to fight over meat on the streets…

    • Gary2

      sounds like you have the “Road House Blues”

  • Evie

    Realistically whete we are at now. The corporations raising prices on merchandise there is no demand for. Currency and debt swaps. Wow the citzen has no say so just pick up the bill? But whos bill? Banks think everyone owes them thousands? Um for what product or service? Corporate greed!

  • Nina
  • Neo1

    Time to starve the bastards with Lawful Money, cannot be fractionalized.
    You will pay No income tax on it. It becomes Tax Free Money.

  • Agent P

    ‘Strong $Dollar’…? The rinse/repeat cycle can only be done so many times before the fabric of the clothes inside the washing machine disintegrate. We act as if we are our own little planet – just U.S. and our ‘strong dollar’, that Everybody is going to run to when panic ensues. Remember, we’ve been down this ‘rinse/repeat’ cycle of ‘running to U.S. $Treasuries’ a few times now since 2008. Do mistake previous inclinations as a lock on future decisions by large holders of U.S. $debt. Especially when a ‘strong dollar’ hurts our export model in a beggar-thy-neighbor world, and many of these $USD ‘buying’ countries are vigorously purchasing land, mines, gold and many other REAL assets around the world.

  • Dr. Nancy

    All the craziness
    that’s happening
    in the economy
    is predictable, as

    there are 7 stages that every
    major economy goes through.

    Those who know how it works
    profit & wealth
    is transferred to them.

    Several months ago
    I learned this information
    from a millionaire

    His free video-

    “The 1 Investment the Top 1% Are Betting On for the
    Coming Economic Collapse”

    is at:

    Hope this info helps you as much as it has me

    • Paul

      Thanks for the infomercial Dr. Nancy.

  • Nowhereman

    Trilions of dollars..orders of ten to the 14!! 10^14 bucks..where in the world IS that money..numbers in a wonder the world finances are in collapse. The money doesnt exist. Cant account for it in gold or silver..where is it?

  • J

    I can’t believe Obama has a “Private Client Asset Management Checking Account” with JP Morgan.

  • It is no coincidence Jamie Dimon is also a director of the NY Federal Reserve Bank. The bank of which the directors will vote to print print print to bail bail bail keeping banks and the likes of Dimon intact, rich and out of jail no matter how much they impoverish the American people and wreck the world economy.

    Dimon until recently was an advisor to Obama – no one has said that. How about Corzine? He was scheduled to become Secretary of the Treasury! ALL world class crooks!

    “Too big to fail”. New slogan “Too Big To Arrest”.

    Look up fascism in dictionary. fascism does NOT equal Hitler. It is the marriage and monopoly of REALLY Big Business with Big Government supposedly for “the greater good” but actually to enslave the 99.9% who are not in this criminal cabal of elite thieves.

    Back to Dimon: conflict of interest? No, of course not. Have a vote to save yourself? He will vote to save the country instead. Hey, pigs do fly! Just saw one!

    BTW – have you noticed Big Business is beginning to turn toward Romney with their big campaign bucks? They see the future.

  • I have children and they had rules. I made them follow the rules. I was not liked at times. The people that make investments have rules and they need to be held to the rules!!!! Our government needs to step up as and hold them to the rules that are there. If they can not do the job or do not want to make them follow the rules!!!!!!!!!!

  • Luke

    I do not have a college education. Growing up I was poor and had no money for college so I got a round trip (I hoped) ticket to Vietnam. But when I returned from Vietnam I figured out that I did need to go to college to learn. So I started to read. So now here I sit with my home paid for. I am debt free. I have 25 acres which connects to Federal land, 25,000 acres. I have a tractor and I have so much gold and silver I can in no way pick it up. I have a free flowing creek 100 ft from my front door. I have four AK-47 and over two thousand round of ammo. I knew this thing was going to pop and I am going to be sitting nice. See what I found out by reading?

  • BFH

    The constant wondering if an improved housing market, lower fuel prices, etc is a joke. Here is the bottom line. NOTHING will make the economy better in the long run. You can survive with the kind of debt this nation is in. 15.87 Trillion and 16.4 in six months or so. They cannot kick the can down the road but so far. That’s when the wheels will fall off and no recovery of any segment of the economy will help even short term. The stage is set people. Stop hoping for short term recovery and start planning for long term depression.

    • BFH

      (Corrected) The constant wondering if an improved housing market, lower fuel prices, etc will help rebound the economy, is a joke. Here is the bottom line. NOTHING will make the economy better in the long run. You cannot survive with the kind of debt this nation is in. 15.87 Trillion and 16.4 in six months or so and even higher beyond that. They cannot kick the can down the road but so far. That’s when the wheels will fall off and no recovery of any segment of the economy will help even short term. The stage is set people. Stop hoping for short term recovery and start planning for long term depression.

  • Max Goldberg

    See what I found !! Gold Price Chart – Live gold spot prices

  • This article was published in May. Now slightly less than half a year later, JPM is 20% higher, as is the rest of the market.
    Things may be a bit bearish now, but I think your prediction was a bit premature.

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