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mathematically perfected economy™ (MPE™)    1  :   the singular integral solution of  1) inflation and deflation,  2) systemic manipulation of the cost or value of money or property, and  3) inherent, artificial multiplication of debt into terminal systemic failure;    2  :  every prospective debtor's right to issue legitimate promises to pay, free of extrinsic manipulation, adulteration, or exploitation of those promises, or the natural opportunity to make good on them;    3  :  our right to certify, to enforce, and to monetize industry and commerce by this one sustaining and truly economic process.

MORPHALLAXIS, January 14, 1979.

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 Post subject: $0.7 Quadrillion Fed Notes Derivative Contracts
PostPosted: 12 Mar 2009, 2:26 am 
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Joined: 29 Jan 2008, 6:06 pm
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Thomas Kostigen Market Watch wrote:
THOMAS KOSTIGEN'S ETHICS MONITOR
The $700 trillion elephant in the room
Gargantuan derivatives market weighs on all other issues
Last update: 12:01 a.m. EST March 6, 2009
MSNote: Read Comments: 360
[TargetURL]http://www.marketwatch.com/news/story/The-700-trillion-elephant-room/story.aspx?guid={024DB809-8506-4AA9-83BB-B053FD4E1C11}[/TargetURL]
SANTA MONICA, Calif. (MarketWatch) -- There's a $700 trillion elephant in the room and it's time we found out how much it really weighs on the economy.
Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.
But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.
Try as we might to salvage the residential real estate market, it's at best worth $23 trillion in the U.S. We're struggling to save the stock market, but that's valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion.
Compare any of these to the derivatives market and you can easily see that we are just closing the windows as a tsunami crashes to shore. The total value of all the stock markets in the world amounts to less than $50 trillion, according to the World Federation of Exchanges.
To be sure, the derivatives market is international. But much of the trouble we're in began with contracts "derived" from the values associated with U.S. residential real estate market. These contracts were engineered based on the various assumptions tied to those values.
Few know what derivatives are worth. I spoke with one derivatives trader who manages billions of dollars and she said she couldn't even value her portfolio because "no one knows anymore who is on the other side of the trade."
Derivatives pricing, simply put, is determined by what someone else is willing to pay for the contract. The value is based on an artificial scenario that "X" will be worth "Y" if "Z" happens. Strip away the fantasy, however, and the reality of the situation is akin to a game of musical chairs -- without any chairs.
So now the music has finally stopped.
That's why stabilizing the housing market will do little to take the sting out of the snapback we are going through on Wall Street. Once people's mortgages were sold off to secondary buyers, and then all sorts of crazy types of derivative securities were devised based on those, and those securities were in turn traded on down the line, there is now little if any relevance to the real estate values on which they were pegged.
We need to identify and determine the real value of derivatives before we give banks and institutions a pass-go with more tax dollars. Otherwise, homeowners will suffer as banks patch up the holes left in their balance sheets by the derivatives gone poof; new credit won't be extended until the raff of the old credit is put behind.
It isn't the housing market devaluation, or the sub-prime mortgage market defaults that have us in real trouble. Those are nice fakes to sway attention away from the place where greed truly flourished -- trading phony instruments to the tune of $700 trillion.
Let's figure how to get out from under that. Then maybe the capital will begin to flow again through the markets. Right now, this elephant isn't just in the room, it's sitting on us.
Thomas M. Kostigen is the author of You Are Here: Exposing the Vital Link Between What We Do and What That Does to Our Planet (HarperOne). http://www.readyouarehere.com




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 Post subject: Re: $0.7 Quadrillion Fed Notes Derivative Contracts
PostPosted: 12 Mar 2009, 2:34 pm 
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Derivatives are quietly dismissed but in reality they will further destabilize the world economy. All derivative contracts should be declared null and void.




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 Post subject: Re: $0.7 Quadrillion Fed Notes Derivative Contracts
PostPosted: 15 Apr 2009, 4:41 pm 
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Joined: 24 Jan 2008, 8:33 pm
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DrKrbyLuv wrote:
Derivatives are quietly dismissed but in reality they will further destabilize the world economy. All derivative contracts should be declared null and void.

Others of course are asserting that derivatives are a cause of the present problems (Ellen Hodgson Brown), whereas I've been demonstrating how they're an inevitable consequence of the system of exploitation, because of course its satellite banks and subjects have to falsely justify assuming the ever greater volumes of credit necessary just to maintain a vital circulation. You have to create false assets or evidence of wealth to do so; and the instrument by which you do so must make it difficult to distinguish between outright fraud (which still is reasonably obvious) and crime (from which we can hardly tell the difference).

So we're not collapsing because of the derivatives, but because of the things we had to so falsely justify by such falsified evidences of wealth.

But I've been biting my tongue on this for a good while; and I have an abstract concern that I'd like to raise — that these instruments nonetheless comprise obligations which in the end reflect how much in debt we actually are, or how much indebtedness is hidden.

Anyway, that's just something to remember as we tread the one-way road to monetary failure under a currency which by intention can only multiply debt in proportion to a vital circulation — and thus into terminal debt and vast dispossession. "Difficult" as these purposely ambiguous instruments may be... you watch, and see if the rats in the hen house have the gonads to come claim their prizes (if they can last long enough to do so).




mike


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"When the freedom they wished for most was the freedom from responsibility, then Athens ceased to be free, and never was free again."



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While 12,000 homes a day continue to go into foreclosure, mathematically perfected economy™ would re-finance a $100,000 home with a hundred-year lifespan at the overall rate of $1,000 per year or $83.33 per month. Without costing us anything, we would immediately become as much as 12 times as liquid on present revenue. Transitioning to MPE™ would apply all payments already made against existent debt toward principal. Many of us would be debt free. There would be no housing crisis, no credit crisis. Unlimited funding would immediately be available to sustain all the industry we are capable of.

There is no other solution. Regulation can only temper an inherently terminal process.

If you are not promoting mathematically perfected economy™, then you condemn us to monetary failure.



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