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The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System - (Read Full Article)

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.

Austerity In America: 22 Signs That It Is Already Here And That It Is Going To Be Very Painful

Over the past couple of years, most Americans have shown little concern as austerity measures were imposed on financially troubled nations across Europe. Even as austerity riots erupted in nations such as Greece and Spain, most Americans were still convinced that nothing like that could ever happen here. Well, guess what? Austerity has arrived in America. At this point, it is not a formal, mandated austerity like we have seen in Europe, but the results are just the same. Taxes are going up, services are being slashed dramatically, thousands of state and city employees are being laid off, and politicians seem to be endlessly talking about ways to make even deeper budget cuts. Unfortunately, even with the incredibly severe budget cuts that we have seen already, many state and local governments across the United States are still facing a sea of red ink as far as the eye can see.

Most Americans tend to think of "government debt" as only a problem of the federal government. But that is simply not accurate. The truth is that there are thousands of "government debt problems" from coast to coast. Today, state and local government debt has reached at an all-time high of 22 percent of U.S. GDP. It is a crisis of catastrophic proportions that is not going away any time soon.