The $2.3 Quadrillion Global Timebomb, by Egon von Greyerz | STRAIGHT LINE LOGIC

https://straightlinelogic.com/2021/04/17/the-2-3-quadrillion-global-timebomb-by-egon-von-greyerz/

https://goldswitzerland.com/the-2-3-quadrillion-global-timebomb/

It’s a question of when, not if, the timebomb explodes. From Egon von Greyerz at goldswitzerland.com:

… A major part of the outstanding derivatives are OTC (over the counter) and hidden in off balance sheet special purpose vehicles.

LEVERAGED ASSETS JUST GO UP IN SMOKE

The $30 billion in Archegos derivatives that went up in smoke over a weekend is just the tip of the iceberg. The hedge fund Archegos lost everything and the normal uber-leveraged players Goldman Sachs, Morgan Stanley, Credit Suisse, Nomura etc lost at least $30 billion.

These investment banks are making casino bets that they can’t afford to lose. What their boards and top management don’t realise or understand is that the traders, supported by easily manipulated risk managers, are betting the bank on a daily basis.

Most of these ludicrously high bets are in the derivatives market. The management doesn’t understand how they work or what the risks are and the account managers and traders can bet billions on a daily basis with no skin in the game but massive potential upside if nothing goes wrong.

… Just take the notorious Deutsche Bank (DB) that has outstanding derivatives of €37 trillion against total equity of €62 billion. Thus the derivatives position is 600X the equity…

Derivatives can only be netted down on the basis that counterparties pay up. But in a real systemic crisis, counterparties will disappear and gross exposure will remain gross.

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