The Beginning Of The End
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The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System

Most people have no idea that Wall Street has become a gigantic financial casino.  The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end.  The word "derivatives" sounds complicated and technical, but understanding them is really not that hard.  A derivative is essentially a fancy way of saying that a bet has been made.  Originally, these bets were designed to hedge risk, but today the derivatives market has mushroomed into a mountain of speculation unlike anything the world has ever seen before.  Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion.  Keep in mind that the GDP of the entire world is only somewhere in the neighborhood of $65 trillion.  The danger to the global financial system posed by derivatives is so great that Warren Buffet once called them "financial weapons of mass destruction".  For now, the financial powers that be are trying to keep the casino rolling, but it is inevitable that at some point this entire mess is going to come crashing down.  When it does, we are going to be facing a derivatives crisis that really could destroy the entire global financial system.

Most people don't talk much about derivatives because they simply do not understand them.

Perhaps a couple of definitions would be helpful.

The following is how a recent Bloomberg article defined derivatives....

Derivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates.

The key word there is "speculation".  Today the folks down on Wall Street are speculating on just about anything that you can imagine.

The following is how Investopedia defines derivatives....

A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

A derivative has no underlying value of its own.  A derivative is essentially a side bet.  Usually these side bets are highly leveraged.

At this point, making side bets has totally gotten out of control in the financial world.  Side bets are being made on just about anything you can possibly imagine, and the major Wall Street banks are making a ton of money from it.  This system is almost entirely unregulated and it is totally dominated by the big international banks.

Over the past couple of decades, the derivatives market has multiplied in size.  Everything is going to be fine as long as the system stays in balance.  But once it gets out of balance we could witness a string of financial crashes that no government on earth will be able to fix.

The amount of money that we are talking about is absolutely staggering.  Graham Summers of Phoenix Capital Research estimates that the notional value of the global derivatives market is $1.4 quadrillion, and in an article for Seeking Alpha he tried to put that number into perspective....

If you add up the value of every stock on the planet, the entire market capitalization would be about $36 trillion. If you do the same process for bonds, you’d get a market capitalization of roughly $72 trillion.

The notional value of the derivative market is roughly $1.4 QUADRILLION.

I realize that number sounds like something out of Looney tunes, so I’ll try to put it into perspective.

$1.4 Quadrillion is roughly:




It is hard to fathom how much money a quadrillion is.

If you started counting right now at one dollar per second, it would take 32 million years to count to one quadrillion dollars.

Yes, the boys and girls down on Wall Street have gotten completely and totally out of control.

In an excellent article that he did on derivatives, Webster Tarpley described the pivotal role that derivatives now play in the global financial system....

Far from being some arcane or marginal activity, financial derivatives have come to represent the principal business of the financier oligarchy in Wall Street, the City of London, Frankfurt, and other money centers. A concerted effort has been made by politicians and the news media to hide and camouflage the central role played by derivative speculation in the economic disasters of recent years. Journalists and public relations types have done everything possible to avoid even mentioning derivatives, coining phrases like “toxic assets,” “exotic instruments,” and – most notably – “troubled assets,” as in Troubled Assets Relief Program or TARP, aka the monstrous $800 billion bailout of Wall Street speculators which was enacted in October 2008 with the support of Bush, Henry Paulson, John McCain, Sarah Palin, and the Obama Democrats.

Most people do not realize this, but derivatives were at the center of the financial crisis of 2008.

They will almost certainly be at the center of the next financial crisis as well.

For many, alarm bells went off the other day when it was revealed that Bank of America has moved a big chunk of derivatives from its failing Merrill Lynch investment banking unit to its depository arm.

So what does that mean?

An article posted on The Daily Bail the other day explained that it means that U.S. taxpayers could end up holding the bag....

This means that the investment bank's European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn't get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to "give relief" to the bank holding company, which is under heavy pressure.

This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input.

So did you hear about this on the news?

Probably not.

Today, the notional value of all the derivatives held by Bank of America comes to approximately $75 trillion.

JPMorgan Chase is holding derivatives with a notional value of about $79 trillion.

It is hard to even conceive of such figures.

Right now, the banks with the most exposure to derivatives are JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup, Wells Fargo and HSBC Bank USA.

Morgan Stanley also has tremendous exposure to derivatives.

You may have noticed that these are some of the "too big to fail" banks.

The biggest U.S. banks continue to grow and they continue to get even more power.

Back in 2002, the top 10 U.S. banks controlled 55 percent of all U.S. banking assets.  Today, the top 10 U.S. banks control 77 percent of all U.S. banking assets.

These banks have gotten so big and so powerful that if they collapsed our entire financial system would implode.

You would have thought that we would have learned our lesson back in 2008 and would have done something about this, but instead we have allowed the "too big to bail" banks to become bigger than ever.

And they pretty much do whatever they want.

A while back, the New York Times published an article entitled "A Secretive Banking Elite Rules Trading in Derivatives".  That article exposed the steel-fisted control that the "too big to fail" banks exert over the trading of derivatives.  Just consider the following excerpt from the article....

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

So what institutions are represented at these meetings?

Well, according to the New York Times, the following banks are involved: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.

Why do those same five names seem to keep popping up time after time?

Sadly, these five banks keep pouring money into the campaigns of politicians that supported the bailouts in 2008 and that they know will bail them out again when the next financial crisis strikes.

Those that defend the wild derivatives trading that is going on today claim that Wall Street has accounted for all of the risks and they assume that the issuing banks will always be able to cover all of the derivative contracts that they write.

But that is a faulty assumption.  Just look at AIG back in 2008.  When the housing market collapsed AIG was on the wrong end of a massive number of derivative contracts and it would have gone "bust" without gigantic bailouts from the federal government.  If the bailouts of AIG had not happened, Goldman Sachs and a whole lot of other people would have been left standing there with a whole bunch of worthless paper.

It is inevitable that the same thing is going to happen again.  Except next time it may be on a much grander scale.

When "the house" goes "bust", everybody loses.  The governments of the world could step in and try to bail everyone out, but the reality is that when the derivatives market comes totally crashing down there won't be any government on earth with enough money to put it back together again.

A horrible derivatives crisis is coming.

It is only a matter of time.

Stay alert for any mention of the word "derivatives" or the term "derivatives crisis" in the news.  When the derivatives crisis arrives, things will start falling apart very rapidly.


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  • DownWithLibs

    I heard that they were even placing bets on bets! Wouldn’t surprise me.

    It just amazes me that this crap has been able to go on this long. There will be no way to undo it and no one will be safe when the cards come down.

    • Paul

      Yes. I have an investment advisory and in it it recommended me to invest in some kind of bet that pays 2×1 if you win. Is like, betting that somethings will come down and if you win, you get twice the money you put into. Just crazy…

    • expatriot

      Neo-cons lick banker ************. Fascism sucks.

  • Steve

    Didn’t someone a while back say derivative contracts should be tightly regulated and forced to be transparent on a dedicated public exchange….probably too late for that to work now.

  • Too Many Fat Asses In The USA

    My demands? Simple:

    1) Revolution
    2) *****************************

  • Pat

    From: – Well I have some personal knowledge that many municipalities, governments and universities are heavily vested in the derivative markets. They especially were attracted to the Credit Default Swaps. (Please do not ask me for details since I am not at liberty to say more.)

    I might also say that they were well aware of the risks involved but were trying achieve incredible returns in the short term to a) keep their clients happy, b) keep their jobs and c) hide winnings from the public.

    Start a gold savings plan now.

    Great article, Michael.

  • mark

    Did not Greenspan say that the United States could always print more dollars. If I hand you a twenty dollar bill and you can trade it for an item every thing is great. When it takes two or three to trade for the same item things aren’t so great. I always have thought that I should pay my bills. This is part of my value system. This huge game that is a ripoff by Bank of America and others are not my bills. I used to think our National debt was part of my bills. Since the bailouts of banks and Wall Street the debt has grown so much that I am starting to think that these are not my bills. I would prepare for a very different future that will be coming to a city near you.

  • Otown Right Guy

    JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup

    If you have deposits on accounts with any of these evil companies, cash out ASAP!

  • http://YAHOO RICHARD


    • olde reb

      Who wins? Those who are closest to the printing press.

  • mondobeyondo

    Most people have never heard of credit derivatives swaps. I’d guess (quite conservatively) that 90 percent of the public has no idea what they are.

    Shame on them. This will be far, far, far worse than the 2008 crisis. (Make that far[x10]).

    A quadrillion dollars? Good Lord. There is no escape.

    Where’s that Tsar Bomba video when you need it?! Ah yes, I found it. This is a visual representation of what will happen when the derivatives market goes ka-boom. Enjoy – if you dare:

  • anne

    The Federal Reserve is a Private Bank. Our Political leaders fully understand this and have failed to impose the restrictions on this bank necessary to protect the Tax Payers. Our govt is corrupt and the entire Banking system is corrupt. The end of this game is going to be ugly.

  • BHO

    How can the Average Joe get in on the fun?

  • Jase

    There is an easy way to end this. Just like the first time around CDO’s and CDS’s should have been properly valued and those institutions that were bailed out and the people that were allowed to collect on CDS’s should have been wiped out vs., being rewarded.

    What people don’t understand is not only is wall street a casino, but it is like one of us being in Vegas, having a multimillion line of credit and every time we lose our debts are wiped clean and we’re given more credit. All that is different is instead of millions, these financial institutions are messing around with trillions.

    Sure the amount of derivatives is mind boggling, but the reality is all that ‘money,’ is vaporware. It never existed. Just because the banks decided to take in billions in fees in order to sell trillions in bull crap swaps and derivatives doesn’t mean the rest of us have to pay for those losing bets.

    Only deposits from people and corporations should be insured. Actual solid assets, not some contract or BS financial instrument that is worth trillions.

    Heck, the actual real debt and the real valuation of CDO’s is bad enough and a problem we can’t work through.

    You allow the banks to steal even more money covering their bad bets to the tune of unimaginable trillions put on the shoulders of common American’s and global citizens and it really is the end of society.

    I raved over and over that we should have let GM, the other big banks, and the system itself if necessary fail back in 2008. All we did was allow more time for these same pieces of crap to make the situation even more impossible to manage or correct.

  • r.bitting

    Sure things are bad right now but after the election in 2012, we will be back on track…. or is it ” the world will think we’re on crack “…OR, maybe it’s the world that says ” now we should attack ” … I can’t remember, but no matter, Oh, wait, now I remember, it’s ” After 2012 we will all be in serious lack. But don’t worry, the politicians will have your back…. or is it ” they’ll stab you in the……. ( Trust in God, and let the fools trust in man ).

    • GoatLady

      I like that, thanks for the laugh!

  • Hunter

    It’s all going to be inflated away just like you inflate away debt. I don’t know if we will see the words “derivative crisis” in the news. Most people won’t know what happened. But you are spot on with you analysis, great article!

  • The Golden Child

    this needs to end alread so we can ge on with rebuilding america. keeping it up is a waste of time. so i guess this is the year when it goes down

  • http://TheEconomicVoice Gregge Johnson

    These figues are staggering>>>>> all they have to do is keep hitting the ;;DELETE;; button on all those zero’s 00000000 its all electroniclly made up money fron thin air, from the compcontrollers at the Federal Reserve and World Bank,,

  • Texar

    Shut down these banks and abolish the Fed. If you owe money to one of these banks, you get your asset free and clear and/or your credit card debt just disappears. Have Congress issue DEBT free money and let’s start over. It is IMMORAL to have the taxpayer on the hook for this dispicable greed. It’s as immoral as slavery was… and it’s tearing our country apart.

  • Marco

    I guess you really can say that the overall economic crisis is caused by one thing – greed. And to think that those people with all that money are _still_ not happy. I pity them.

    Every time I read these articles, I shake my head. At the same time though, I think of Philippians 4:7. Then I try to do what I can to inform and help others. Keep up the great work!

  • 007

    The derivative bets on European defaults have to be massive. You can bet they are made by or written by our banks. It could take a 100 trillion to cover all these bets.

    These wicked speculative bets should never have been legal. Every politician that passively allowed these to continue should go to jail. This is utter corruption.

  • Colin

    A study was released this autumn that demonstrated that traders are psychopathic and are willing to take more risks than ‘normal’ psychopaths. I think this is very important when we consider what is happening, and it’s very scary for us. If we ever wanted to experience the horror of being held captive by a psychopath, we don’t have far to go for we live and struggle to survive in their world.

    Some articles:

  • nowwthen

    Assuming a dollar bill has a thickness of 0.0043 inches and the sun is 93 million miles from earth a stack of 1.5 quadrillion one dollar bills would extend into space 8.8 million miles farther than the distance from Wall the sun.

    (0.0043 x 1,500,000,000,000) / (12 x 5280) =


  • Jeremy

    Great article Michael, and you are right on the money.

  • michelle

    remember the start trek episode…

    they just wanted to bet on everything…

    kind of prophetic, looking back – although one of the cheesier episodes..

  • Southern Trumpet

    French Revolution 2.0 on the way banking *****************

  • Paul

    There is only one way out: put your money in longlasting goods. No more perishable goods except food, medicines and heating.
    Quit your phone contracts and Internet and all other monthly payment obligations. Repay mortgages, do not take any credit, do not sign obligations you wouldn’t be able to pay right now out of your savings.
    Don’t give other people power over you.


    Just live off other people’s money. Make as much debts as you can and live life to the fullest.

    • mark c

      What is the first thing you do, when you find yourself in a hole?………….I’m waiting……………YOU STOP DIGGING!

      • Paul

        No, you dig further and then call the news and collect donations from the poor for your rescue.

  • Paul

    The trick is now to sell those derivatives and buy gold instead. As the derivatives will lose money anyway and there is not enough gold to buy for all those derivatives, you can accept any price for the sale of the derivatives and be willing to pay any price for the gold.

    And when you have all the gold of the world you are the king of the world, until someone kills you.

    • mark c

      now is a good tome to buy gold and silver,January would have been a better time. look at Germany from 1922-1923 gold jumped from
      1600 to 15000 in 3 days. its lke a Green bay defensive lineman hitting you.I hope
      we don’t go down that hard.

      • Paul

        What will you do with the gold and silver? Eat it?

        Now is a good time to buy a pullover and woollen blanket.

  • mark mcbee

    We will reach 100% debt to GDP ratio on Halloween 2011. It’s scary and ironic. If you count unfunded liabilities like Social Security and Medicare we already reached at least 380% debt to GDP ratio.

  • Bone Idle

    If Europe falls over with a cascading effect to the R.O.W. The derivative problem will be moot.
    The six hundred odd Trillion can be swept under the carpet and written off. Those bankers who profiteered from the derivative boom will get away with their heads…… and mansions….. and etc, etc, etc.

    Given time a whole new derivatives boom can be reassembled.

  • patriot alice

    A derivative is nothing but a false security, promising to insure a bet it won’t…It’s like an Insurance Company selling policies, with no money for the payouts…

  • William

    A previous head of the CFTC, a woman named Brooksley Born, tried to get some sort of control and transparency on these unregulated derivatives. She was crushed by Greenspan, Rubin and Summers. What do these three have in common???

  • Emily from SC

    When the derivitives time bomb explodes, does that meant that we will have instant hyperinflation as money is massively created to cover these bets going bad or will we have instant hyper-deflation as all the money in the world is sucked into this black hole of bets going bad?

    OR … will we swing rapidly from one to the other and all puke after that nauseating and insane roller coaster?!!

    I’m fairly alarmed here.

    • mark c

      I am sick of the new sugar coated words that are substituted these days. Its called Runaway Inflation and you will know the meaning of
      “Brother can you spare a dime”

  • Syrin

    FIVE, count them, FIVE banks have exposure to 96% of the $250 trillion derivatives market. Furthermore, they have HEAVY exposure to European banks so when (not if) Greece defaults, then Italy follows, then Spain, then France, our banks too will be caught in the domino effect. It will truly be global financial collapse.

    What to do? Have as little exposure to the financial market meaning put your savings account in a small local bank, get physical gold and silver, guns, food, water and a plan.

  • Mesmer

    Let them implode. There was life on this planet long before money was invented and programs such as The Venus Project will ensure that we all have a much better way of life after money fails.

  • Rowell

    When I read about Bank of America, derivatives and the FDIC yesterday, I understood completely just how broken the system is, and how totally beyond fixing it is. The banks can do what they want. Laws don’t matter. Regulation doesn’t matter. They make the rules. They have all the power. They’re going to bleed us dry until there is absolutely nothing left.

    So use that worthless money now to buy the things you’ll need after the dollar is just another piece of paper. Stock up on food, and the necesities.


    Now to the nuts and bolts of the matter. This article is spot on in many respects. I like the way you break down what derivatives are and how they work. I also like the fact that you highlight the role that the megabanks are playing in this financial scandal and destruction.

    The only points of contention I have with this article are: 1. You point out that one of the groups of supporters for the bailouts are Obama Democrats. True, but to clarify and be more accurate it would have been wiser to say that Obama and the Democrats in Congress as then U.S. Senator Barack Obama (D-ILL) also voted for the first “official bailout” known as TARP.

    2. Instead of the below santized language: “This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input.” how about the words “Class Warfare of rich banking and political elites”?


    Class warfare started long before Occupy Wall Street came onto the scene. In fact class warfare started when the U.S. Constitution was first written. Remember, only white males with property could vote or hold office, women could not vote and were relegated to the kitchen and the bedroom, blacks were slaves and the Native Americans were nearly wiped out. Therefore, the notion when those “called leftists” want change to a system that demands fairness are engaging in class warfare is simply ridiculous. Rich monetary elites trying to hide their crimes and consolidate their wealth say this to squash challenges to their illigitimate and undemocratic rule based on theft of national, state, and local treasuries and murder. Again, this gets back to point A, and that is unless and until people disavow themselves of both wings of the war party, they will continue to get economy crashing policies based largely on financial ponzi schemes and outright theft.

  • John Jackson

    The next 6-18 months will bankrupt 95% of the middle class net worth. You must prepare and be on the right side of this wealth transfer. Learn how to protect your freedom and wealth:

  • PatriotRider

    Derivatives are to todays financial system what “margin” was to Wall Street in 1929…x1000

  • callmecordelia1

    I think I’m beginning to understand the massive problem we have here, thanks mostly to Michael and his blog. What I’m wondering is how it will play out for individuals. Let’s just say, (hypothetically :D), that I have my mortgage with Bank of America, and all of my personal and business accounts with JP Morgan Chase. If they go down, what happens? I assume that I lose all of the money in my accounts. What happens to the mortgages? What happens to our homes? What do we do to protect ourselves? I’ve heard many people say to get our money out of the big banks. So let’s say I move all of my business accounts to a local credit union. Will that help? Does it matter? Or is it a house of cards that will come down on everyone, no matter the size of the bank/credit union? Does anyone have any thoughts on this? I know some will say to get all of our assets out of banks, but that’s not an option for me. I’m an internet retailer, and all of my transactions are done online through credit cards and get automatically transferred to my bank. What do I do?

    • Michael

      I wouldn’t panic. Your bank account is going to be insured by the federal government.

      What I would do is to start stockpiling the things you will need in the months and years to come. The more self-sufficient we all become, the better.

      What kind of Internet retailing do you do?


      • callmecordelia1

        Thank you Michael! I guess I just figured that “insured by the federal government” wouldn’t mean a whole lot if it all came crashing down. It seems like eventually there will be no more blood to get out of the turnip. As for my internet business– I sell cookie cutters. :D Kind of random, but we actually do really well with it.

        • Michael

          Little niche businesses like that can do very well these days.

          I encourage everyone to go check out your site…..


          • callmecordelia1

            Thanks so much Michael! I appreciate you taking the time to look at it. :) It has proven to be pretty recession-proof so far (knock on wood). In fact our sales really went up in October 2008, which is an odd study in economics. It’s a fun business to be in. It keeps me smiling through tough times– which is maybe why sales go up in tough times. It makes others smile, too.

      • mark c

        The FDLC is bankrupted right now!

  • denny

    1. Bring your family closer. 2. Get to know your neighbors better. 3. Begin to explore the possibilities and power of trust, communication and co-operation (virtuous yet lost art forms) We are going to need to talk with each other. 4. Turn off your t.v. 5. Abandon the psychology of consumerism – more, better, success, respect through accumulation, etc. These traits are merely distractions which prevent us from affecting meaningful change. 6. Try to avoid buying corporate if and when possible. The only thing they really pay attention to is the bottom line. Hit them there and we reverse the table – we have the power. 7. Together we are powerful, very powerful. It hasn’t been a left/right struggle for a long, long time. It’s become a rich vs. the rest of us and at this point they’re winning. Remember, it is not only about economics. These recent developments concern our souls and our very survival. We will have to learn to rely upon and trust each other. That part is essential and very important. Good luck as it will be a very long path requiring much diligent work to recover our emotional, spiritual, psychological and economic health.

  • Electrikoolaid

    Only knaves find profit in knavery.

  • knightowl77

    I’ve have agreed that this blatant gambling and not investing…That they are allowed to gamble, lose and then get bailed out with taxpayer money is beyond understanding.
    This kind of abuse does need to be eliminated, and people marched off to jail for using taxpayer funds to backstop this madness. Pols of both parties should be ashamed as they are frogmarched out of their offices and into prison for allowing this…

  • justamom

    Thanks for this important reminder, Michael. Derivatives really are the “wild card” in the whole global economical equation; simply no one knows what will happen when it all comes crashing down.

  • jerry O

    The joke is that wall street big shots make statements, as if they’re trying to help fix the problem.

    But the elite bankers are the ones who have caused the problems.

    Goldman Sachs strategist Alan Brazil asks: “Can the US continue to depreciate the world’s base currency?”

    Goldman Sachs controls the US, so he should know the answer.

    All of these ‘prophets of doom’ have financial education, which allows them to funnel your hard-earned money into their pockets.

    So if want to protect your money and leverage the greatest transfer of wealth in history, then you need relevant financial education too.

    See a video put together by a millionaire
    that understands were we are going and how
    to profit from it.

  • Art

    “The merchants …who became rich… will stand at a distance…saying ‘Alas, alas, …for in one hour such great riches came to nothing!’”

  • TJ Jackson

    “Of the people, for the people and by the people”…What a joke. Remember, the future belongs to the prepared.

  • John Jackson

    What’s going to take place in the economy in 2012 can bankrupt 95% of the population… (Fact: This has already happened in 30 distinctive countries during the last 100 years, and TWICE in the US!) Learn how to not only survive the economic collapse but thrive from it:

  • Rob

    When it comes to derivatives, its all about counter party risk. The notional value keeps rising exponentially because the parties involved are trying to prevent an unraveling due to counter party risk, where one institution can’t make its obligations and starts a chain reaction.

    The notional value number is so high that its basically meaningless at this point. The real concern is how much of that value is unhedged and therefore exposed to interest rate risk. Its pretty much impossible to tell but I’m sure we’ll have a much better idea once we see interest rates begin to rise.

    Even if the exposure is only one half of one percent, that’s still $7 trillion! The one lesson that will come out of this whole mess when it finally does unravel is that no matter how hard you try, you can’t cover any and all risks at the same time. This will be the closing line in the upcoming PBS Frontline documentary…

  • Steve

    I am only trying to hold things with value, land, precious metals, food, ammo, seeds and other items. I started doing this over a year ago and my basement is getting full. None of my friends believe me, they think I am crazy.. I don’t care.. I will make it and I will help some of them, because I know I can’t make it alone when the SHTF… My next move is to get off the east coast

  • sharonsj

    The derivatives problem has been going on for decades. More than 20 years ago, whole cities, pension systems, and school budgets went bankrupt because they were conned into investing in derivatives. They were told these things were safe, but derivatives are really nothing but making bets on whether prices go up or down.

    Has any regulation been passed to stop this? Of course not. Not when Congress is bought off and the FED and the SEC do whatever they want (which is to keep the old boy network greased). This country has been screwed over by the really rich, and if we had a media that actually told us the truth, then you would have seen Occupy Wall Street a lot sooner.

  • Troy Mclure

    As long as you can gamble with the US citizen picking up any losses, they will continue to gamble. You only way to correct the problem is to let capitalism run its course and let them fail.

  • sanityjones

    The global financial system NEEDS to be destroyed. Too bad there won’t be enough corpses to throw in the street to cover it all up……..or will there?

  • The Elevation Group

    The Housing Crisis of 2008 and the current derivatives crisis wouldn’t be possible, if our leaders hadn’t repealed the Glass-Steagall Act, which was passed after the Great Depression to prevent investment companies from gambling with the banks savings.

    In Nov. 1999, provisions that prohibit a bank holding company from owning other financial companies were repealed by the Gramm–Leach–Bliley Act, named after its co-sponsors Phil Gramm (R, Texas), Rep. Jim Leach (R, Iowa), and Rep. Thomas J. Bliley, Jr. (R, Virginia).

    The Gramm–Leach–Bliley Act was signed into law by President Clinton.

    The repeal of provisions of the Glass–Steagall Act of 1933 by the Gramm–Leach–Bliley Act effectively removed the separation that previously existed between investment banking which issued securities and commercial banks which accepted deposits.

    So we should condemn Glass-Stegall’s repeal for reestablishing conflict of interest within the financial industry and fostering “too big to fail” institutions that led to the housing market collapse and its associated financial crisis.

    So many times we want to just blame Bush and/or Obama, but Clinton played a huge role in our current crisis too.

    • William

      Your post is quite accurate. And, yes, this is the precise reason for WHY we are in this derivatives nightmare. A large part of this horror are the CDS……Credit Default Swaps….so named because they are actually insurance. Calling them CDS prevented the state insurance commissioners from having any authority over them. Gramm is at the center of this stupidity.

      • 007

        These politicians acted like total whores and sold out the country for their own benefit and political bribes. How did they even think up this evil law? An even better question, why have they not already repealed this law since it almost destroyed the country? They are so in the banks pockets. Every incumbent that has stood by and passively allowed this law to continue should be thrown out of office.

    • Zedge Hero

      Exactly, now dig a little deeper and you will find that like the article mentions, it goes back to the Big “5″. Who owns stock in the Federal Reserve that they are not allowed to sell? The big 5? And please forget about the TARP bailout, it is pennies on the dollar compared to the 16 trillion dollar bailout that was given to banksters around the world between 2008-2010 explained here in this video.

      The presstitutes can only cover our eyes for so long. People are realizing that the best way to rob people is to own a bank. More people are realizing that it’s the United Banking Cartel versus us, not me versus you, for we are the many, and they are the few.

    • jackro

      Interesting take on it. I rather think that it isn’t the Glass-Stegal act, but the “too big to fail”.
      If banks knew that there was no “safety net”, via the FED window, then they wouldn’t take these chances in the first place. This is where the answer is. Make the FED do what it is supposed to be doing. Its job is only to keep our currency stable(they haven’t done that since the early seventies at best, more likely since the 1930′s.

      • 007

        Since the creation of the Fed in 1913 the dollar has continued losing it’s purchasing power. A dollar today has so depreciated thanks to the Fed it equals the value of .04 (four cents) in 1913. The Fed has done nothing but destroy the value of our currency. It is evil and should be done away with along with our fractional reserve banking syste.

        “the end is always predestined by the means”

    • mondobeyondo

      The repeal of the Glass-Steagall Act removed the last “check” that we had in keeping the big banks at bay. It should have never been done. But, in the interest of “free trade”, it was. And now, the banks are running rampant, even with their massive taxpayer funded payouts.

      • mondobeyondo

        BAILOUTS. Bailouts. Hate it when I screw up a post.

  • DanD

    When the derivatives market finally does implode, it won’t really matter, because the multiple-pandemics, mass die-off of humanity will have already been initiated.

    Derivative-destruction … that’s the tip-off.


  • Maria

    Thank you, Michael, for doing such a great job of exposing the truth of the world’s predicament. It has helped me and my family understand the situation. That understanding has given us more time to prepare. What a Godsend!

    Please, everyone, take this time we have left to prepare. Come what may, be as ready as you can. Organize with your extended family and friends. And don’t forget the most important preparation of all….your relationship with Jesus.

    God bless you all.

    • Michael

      Well said Maria. I very much appreciate the kind words and I always appreciate the comments that you post.


  • Money Crisis Game Plan

    “Right now, the banks with the most exposure to derivatives are JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup, Wells Fargo and HSBC Bank USA.”

    The same international bankers who own the Federal Reserve, also own Goldman Sachs, Bank Of America, HSBC, JP Morgan Chase, Citigroup and Wells Fargo.

    These same banks received part of an unauthorized 16 Trillion Dollar bailout from the Fed.

    Wake up people. It’s all the same elite bankers, who create market bubbles and economic crisis, to funnel our hard-earned money into their pockets, and leave us enslaved in debt.

    • mark c

      Bush gave TARP money to the banks THAT THEY ALL PAID BACK WITH compare that to the present administration is laughable.

      • jackro

        Well, they kinda paid it back. Then they took out loans from the discount window to cover it, while the FED used the “paid back money’ to purchase common stock. Look deeper into this one and your eyes will bleed.

        This is the very ideal of rob Peter to pay Paul. Only we are Peter and the bank is Paul.


    I’m sick of it all. I feel like we have 4th stage you know what just waiting FOR THE END TO DIE ******** I HATE THE WAITE!!!!!!!!!!!!!!!!!!!

  • The Truth About The NWO

    “When it does, we are going to be facing a derivatives crisis that really could destroy the entire global financial system.”

    Since it is the goal of the elite bankers to move us to a New World Order, the derivatives market is both increasing their wealth and setting up the world financial system to fail…

    So that every country will be eager to align with a one-world financial system that will promise more stability.

    The irony is the when the Federal Reserve Act was passed, it was founded on the premise that the Fed would prevent large fluctuations in the economy, recessions and depressions.

    And since 1913, we’ve all of those things in abundance. We were sold a bill of goods. And the ‘bills’ aren’t worth anything.

  • Randy

    There have been those asking, “What would / could / should we do if the money system went away tomorrow?”

    Here is a plan for when that happens:

    • Maria







    • jackro

      Excellent video. This is not a “loony-tune” guy. This is common sense, out of the box thinking for the ‘hopefully never to happen” situation.

  • Urban Survival Guide

    Hedge Fund Manager John Paulson earned $5 Billion in 2010 and only paid 15% Tax.

    Derivatives don’t ‘benefit’ anyone but the fund managers. They don’t add jobs, economic stimulus, value to people’s lives…

    They’re just computer-controlled gambling bets that when they pay off, enrich the few elite.

    And when they bust, Americans always seem to get stuck with the bill, and we pay the price in our quality of life.

  • Buy Silver Now

    The system was rigged when the Glass-Steagall Act was repealed by Clinton and Rep. Leaders.

    This led to the housing crisis of 2008, but instead of our leaders taking action to prevent it from happening again…

    They just keep letting the corrupt hedge fund managers run wild in placing gambling bets with our money.

    There’s no difference between Republic and Democratic Presidents… they all promote the same agenda for the elite bankers who own them.

    Every fiat currency eventually returns to its true value….ZERO!

    Don’t play their game. Take your money out of their banks (Bank Of America, HSBC, JP Morgan Chase, Citigroup and Wells Fargo)

    Get your money out of IRA’s and 401k’s before they are worth nothing as the Dollar fails.

  • boeing engineer

    Spare me the crocodile tears. This is merely a distraction. When you lose money in Las Vegas, the government doesn’t bail you out. Why should they bail out banks engaged in speculation? Crony capitalism. Pres Obozo and the Dems in Congress receive far more campaign contributions than GOP members, and they needed to grease the pockets of their friends. Most Republicans were in favor of letting the chips fall where they may, even if it resulted in some personal discomfort.

    • Eyeball Kid

      We’re approaching a new paradigm, my friend. It’s not Democrats vs. Republicans anymore. It’s the 99% vs the 1%. It’s corporate and bank domination of the economy vs the workers who are in a downward slide with their purchasing power and disposable incomes. And the gap is growing daily. Republicans are no different than corporate Democrats. They’re all either supporting the 1% or they’re in the 1% bracket.

      That’s the basic message of the OWS movement.

  • Barn Cat

    The Federal Reserve can print as much money as necessary to stabilize the world’s banking system.
    Need $1 trillion? $20 trillion? $500 trillion? No problem. It’s even easier to create it electronically than it is to print it. Of course, it can reach the point where the dollar becomes instantly worthless but no system is perfect.

  • J.C.Vaughan

    The Derivatives Crisis! Maybe of 2012! Consider this the revenge of God for what you did to Iran back in 1953 (and to others since). Rest assured that in choosing Crony Capitalism you followed your own filthy evil nature (just like the Fake-Christian “Family”) and you will deserve everything you get. “You Will Die By Your Own Evil Creation”.

  • Joesph

    Unles Mother Teresa is running these banks, the CEO’s, traders, etc.. will ALWAYS do the wrong thing for the country and will ALWAYS do the right thing to line their own pockets.

    As much as I hate to admit it, there needs to be hugh regulatiosn on banks because again, selfishness, greed and power always prevails without restraints.

    • jackro

      The answer is a simple one. Failure. Get rid of the FDIC, and make the bank CEO, COO, and President responsible out of their OWN pocket for bad business practices. No more FDIC, no more bailouts, and no more “free money” from the discount window at the FED.

  • http://none mona

    This derivative movement by BofA to have the American Tax payers cover their bets should be considered an act of terror.

    The “Too Big To Fails” are plotting to take America down just to protect their own personal needs.

    How can we as American citizens stop this move by the banks?

  • DownWithLibConDebateDistraction

    How long can a system based on gambling trillions of dollars sustain? Throw the dice. That is your answer. And, oh yeah… let’s end the nonsensical distraction tactic of the conservative vs. liberal never ending debate. It is nonsense. It is pointless. It is a distraction. While we endlessly debate a small group of of very wealthy, very clever, very powerful people cart away our wealth. How long will we continue to occupy ourselves with nonsense?

  • Tripseven

    I’m not sharp enought to figure out how to make money placing bets on bets, so I just keep going to the office.
    I’m also not clairvoyant enough to see how all this will affect the U.S. economy let alone the world.
    I’ve worked hard. I paid off my house this year. I paid off my car and my wifes car too.
    I have saved some money, and tried to prepare for disasters like hurricanes, and floods. (both are possible here)

    I doubt I’m prepared well enough for an economic collapse, but how can someone be prepasred for something of this magnitude?

    If you haven’t, trust in Jesus Christ.


    • jackro

      How to prepare
      1. have gold and silver instead of all cash(10% is plenty of gold and silver)
      2. Have at least a years worth of food stored up, and the ability to make a sustainable garden for the years after.
      3. Have at least 2 weeks of water, and the ability to purify it
      4. Have a means of protection
      5. Have a “safe house” a location that is away from masses that you can flee to if things get out of control.

  • James

    When I was 6, hundreds of dollars was a lot of money.

    When I was 14 and had had a job for a while, thousand of dollars was a lot of money, but not hundreds anymore.

    After a bit of life experience at 18, millions of dollars became a lot of money, but thousands weren’t anymore.

    When I started studying politics in college, billions became a lot of money, but millions weren’t anymore.

    When I graduated, trillions of dollars was a lot of money, but billions doesn’t seem like much.

    Now I read this article and quadrillions becomes a lot of money and I wonder if they’ll let me put a pillow on the table before they bend me over it.

    I wonder if Richard Branson will try to colonize Mars anytime soon. Because if so, I’m in.

    • Mal R.

      “I wonder if they’ll let me put a pillow on the table before they bend me over it.”

      LOL! Funny stuff. prolly not.

  • BenjiK

    Our biggest threat is the big banks and the world’s leading nations have morphed into a single, very dangerous entity. A total financial collapse is the only remedy to “reset” these atrocities. However, when the big banks fail, the governments will follow. I guess that leads me to my concern of the OWS protests. How can they be against banks but for government? Banks & government have been manipulated by design in which they feed off of each other. Many people are concerned/fearful of a “New World Order”, but as nations still claim their independent sovereignty, the world’s intertwined, global financial system has already made that claim unsubstantiated. The NWO is here, now, conveniently disguised as the “global financial market”………

    • Tel

      “How can they be against banks but for government?”

      Because they have absolutely no idea what’s going on around them, and that’s the general design of the education system and the news media.

  • http://EconomicCollapse Already Gone

    Wall Street Is Going To Collapse And This Will Be All It Takes To Lite The Powder Keg This Country Is Sitting On. The Politicans In This Country Continue To Turn A Deaf Ear To The Fact A Lot Of People Have Told Them Enough Is Enough,
    It Seems For People To Get Their Attention, All Hell Is Going To Have To Break Out And The Consequences Will Have To Be Dire,Because All They Are Going To Do With The Protesters Is Sneer At Them And Laugh,And When IT Happens It Surely Will Not Be There Fault.Remember The Riots In Los Angles After The Rodney King Beating,Only This Will Be Ten Times Uglier.

  • http://google talei

    where is the law?..where are the people to say stop.why are they getting away with this?im from fiji and my mind boggles at the figures of money that the elite hog.this is financial terrorism.

  • warbaby

    PBS Frontline did a program titled “The Warning”. If you can view this you will learn what this country is in for regarding derivatives.The woman who exposed or tried to was run right into the ground to cover it up. We are indeed in trouble.

  • Capitalist Eric

    $1.4 Quadrillion is roughly:


    If it were in $1 bills, it would cover the WORLD with a layer of paper 1.24 inches.

    THAT is $1.4Q in practical terms.

    How much money you have in your pocket???

  • Capitalist Eric

    Excuse me… 1.24″ thick.

  • mile

    just what the ptb collapse fdic so as to loot all depositors one trillion leveraged 100 to one….is 100 trillion…. to bad with 100 trillion entering the game, 1 trillion is worth only 10 billion…..? and your saving account of 20,000 is only worth 200 bucks. gotta wonder the kickback politiciams got for this..????

  • Antonio Gonzalez

    It’s not economy, it’s gambling.

    • me

      It’s NOT gambling.
      It’s a SURE THING – for them.

    • mondobeyondo

      If only the odds in Las Vegas were as good.

      When I play blackjack or craps there, I usually lose. The big boys “crap” all over us little people, and they win.

  • Mike in Maine

    Forgive me Michael, I kept thinking you were misspelling national with notional. Never saw the word before, but for those who need to know as I did:

    Anyway, obviously the word of the month has to be “Derivatives” I hope I don’t see that word in the lamestream media until after the winter, otherwise it’ll be a very hard season on all of us.

    Blessings to you brother, hope all is well.

  • David M

    Let’s call a spade a spade. It’s the same with quantitative easing = money printing.

    Derivatives = gambling.

    Just fancy terminology.

    David M

  • Russ

    Yep. And when that happens, it won’t matter which party you are loyal to, all will be swept away in the tsunami that follows as the political factions are tied to the banks & vice versa.

  • yourmommyismydaddy

    economic ***********, when the *********** storm arrives you will be the first one on the chopping block..and no, I’m not talking about losing your job but more like your head. The new world order has no space for pea brained conspiracy nuts.

  • sam

    Derivatives are basically a Ponzi scheme.

    • 007

      It’s like selling earthquake insurance on a fault line. They gladly take the money for the premiums and spend it. However, in the event of a earthquake there is absolutely no way they could pay the actual claims. They are counting on being to big to fail and the government bailing them out again.

      Wow, I wonder how the Dodd-Frank bill overlooked doing anything to regulate these dangerous financial instruments. What a bunch of corrupt politicians. The democrats and some republican politicians passed this act. Anyone who voted for this act should be voted out of office. They really sold us all out for the benefit of the big banks.

    • mondobeyondo


      And just for that – you deserve a Social Security check for $000.00. The Treasury Secretary personally signed it!!

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